Role of ATMs, PoS in Cashless Policy

Emma Okonji examines the critical roles of Automated Teller Machines and Point of Sales terminals in achieving the cashless policy of the Central Bank of Nigeria, especially with the recent directives mandating banks to dispense new naira notes through ATMs

To consolidate the gains of its cashless policy, the Central bank of Nigeria (CBN), has mandated all Deposit Money Banks (DMBs) to begin the dispensing of new naira notes through ATMs. Although the banks have commenced implementation of the mandate, THISDAY investigation shows that there are more queues on bank ATMs for those who want to get a glimpse of the re-designed naira notes and need physical cash for their daily transactions.

The long queues however suggest that the available ATMs across banks may not be sufficient to service the growing number of bank customers in recent times.  Banks, therefore, need to increase the number of their ATMs in order to reduce the queues and serve customers better. Again, the drive for digital banking service is compelling most banks to close their physical branches, while advising customers to embrace online digital services and to make use of alternative channels like ATMs, PoS, Unstructured Supplementary Service Data (USSD), Mobile Banking, Online Banking, Internet Banking, among others for financial transactions.

Given renewed drive of the CBN to make Nigeria a cashless society, financial analysts are of the view that banks must devise new means of increasing the number of their ATMs, owing to its importance in driving a cashless economy. Analysts are also of the view that banks must intensify the drive for agency banking and ensure enough spread of PoS terminals in rural communities for a true cashless economy.  

Cashless Policy

To reduce the volume of cash in circulation and to promote electronic transactions in a digital economy, the Central Bank of Nigeria, in 2011, introduced the cashless policy in Nigeria, beginning with a few states, before expanding it to all states of the federation.  

Determined to drive the cashless policy, and ensure seamless electronic transactions, the banks intensified the use of ATMs across all their branches, a development that led to the growth of ATMs and the sales of different brands of ATMs across Nigerian banks. In their resolve to make rural communities feel the impact of cashless economy, the banks also introduced agent banking in rural and underserved communities ensuring the widespread of PoS terminals. The introduction of agent banking, gave boost to the initiative, as agents were able to carry out electronic transactions and dispense cash through the PoS terminals to rural dwellers without banks in their communities.

Following the success of the cashless policy in 2012, the CBN, in November 2022, re-designed the naira note and in December 2022, announced the minimum cash withdrawal across the counter and from ATMs and PoS for individuals and corporate organisations. According to CBN, individuals are to withdraw not more than N500,000 per week, while corporate organisations will not be allowed to withdraw more than N5 million per week. The Apex bank placed a bank surcharge for any withdrawal above the limit. The CBN policy also mandates banks to dispense more of the N200 notes and to make use of ATMs in dispensing the new naira notes, a development that attaches importance to ATMs and PoS terminals.  

Growth of ATMs

Since the introduction of the CBN’s cashless policy in 2011, ATMs have played a vital role in achieving the initiative. As at 2011, when the policy was introduced, the total number of ATMs across Nigerian banks was 10,000, but the number grew to 17,000 in 2015 and 18,000 in 2017, before reaching 22,500 across banks as of December 2022, according to recent statistics obtained by THISDAY. Although the growth from 10,000 in 2011 to 22,500 in December 2022 is phenomenal, the growing number of bank customers and the queues experienced at ATMs, suggest that the current 22,500 ATMs are insufficient to meet the cashless policy initiative of the CBN.

Another statistics obtained by THISDAY from CBN’s website showed that in 2012, a year after the introduction of the policy, the total value of ATM transactions was 1.98 trillion and PoS was N48 billion. In 2013, the total value of ATM transactions increased to N2.8 trillion and PoS also increased to N161 billion. In 2014, the total value of ATM transactions increased to N3.6 trillion, while PoS also increased to N312 billion. In 2015, the total value of ATM transactions increased to N3.9 trillion while PoS also increased to N448 billion. In 2016, the total value of ATM transactions increased to N4.9 trillion, while PoS increase to N758 billion. In 2017, the total value of ATM transactions increased to N6.4 trillion and PoS transactions increased to N1.4 trillion. In 2018, the total value of ATM transactions was N6.5 trillion, while PoS was N2.4 trillion. In 2020, the total value of ATM transactions jumped to N12 trillion, with a corresponding increase in the total value of PoS transactions.     

THISDAY research shows that in emerging markets where cash accounts for at least 80 percent of transactions and the annual rate of decline of cash is less than one percent, the growth in cash transaction volume and value coincides with growth in the number of ATMs.

The Driving Factors

The growth in ATM installations across banks and the value of ATM transactions have been phenomenal since the introduction of the cashless policy in 2011. THISDAY research has however identified some of the driving factors that are responsible for the growth.

According to the research, Inlaks, a leading ICT infrastructure, and systems integrator in sub-Saharan Africa was one of the pioneer companies that started with the sale of Hyosung brand of ATMs in Nigeria, with just two bank customers and a market share of less than 300 units as of 2012. At that time, other technology companies were promoting the NCR and Wincor brands of ATM machines in Nigeria, with NCR having the largest market share of ATMs across Nigerian banks, driven by a Nigerian Fintech sales guru, Mr. Tope Dare who joined NCR in 2010, after disengaging from Oceanic Bank Plc (now EcoBank).

Dare was able to grow the ATM business in Nigeria for two years and six months when he worked with NCR, where he sold over 3,500 ATMs out of the 7,000 ATMs currently controlled by NCR in the Nigerian market. He grew the market share of NCR from 44 per cent to 46 per cent within that period. He later disengaged from NCR in December, 2012 when NCR was leading the ATM market in Nigeria with over 7,000 distributed and installed ATMs. 

He joined Inlaks in January 2013 as a Director in charge of E-Business and Infrastructure, when Inlaks partnered Hyosung to promote the brand of ATM in Nigeria, with less than 300 units installed in the Nigerian market, which was less than one per cent market share of the ATM business.

From 2013, Dare grew the Inlaks’ market share with the Hyosung brand to over 11,500 units as of today in just 10 years corresponding to a market share of 51 per cent as of December 2022. The rise in Inlaks’ market share, placed the company as the leader in ATM sales and distribution in Nigeria as of December 2022 and NCR dropped to number two with 26 per cent market share with less than 6,000 ATMs. Inlaks moved from covering just two banks in 2013 to covering virtually all banks in Nigeria in 2023, a growth strategy that was driven by Tope Dare, using the Hyosung brand that was once perceived as an unknown brand in Nigeria. In 10 years, Dare sold over 11, 000 ATMs, as banks continued to demand for the Hyosung brand. He has expanded the Inlaks’ ATM business from Nigeria to Ghana, Sierra Leone, Guinea, DR Congo, Zambia, and Gambia. In November 2022, Dare was awarded the Fintech Salesman of the Year at the Nigerian Fintech Awards in recognition of his contributions to the industry towards over the decade promoting the deployment of ATMs and many innovations to enhance the customers’ experience on self-service terminals.

Giving details of his strategies in growing the Hyosung brand of ATM at Inlaks, Dare told THISDAY that the winning approaches were based on Inlaks’ philosophy– ‘putting the customer first’. According to him, his business acumen for the demonstration of insight into ATM business, issues, and industry trends relevant to customers, including the selling price, unique features, and functionalities of the Hyosung brand that are designed with a high focus on customers’ needs and pain points per time to drive innovation, have helped him in driving sales of ATMs in Nigeria.

“Value creation through my ability to instill demand for ATMs and other services by identifying, tracking, and measuring customer business value is important. Another strategy being adopted is empathy and customer intimacy, which result in the co-creation of products with customers. The Inlaks core values such as Innovation, Professionalism, Excellence, Adaptability and Customer Centricity (IPEAC), including reliable products and partnering with a responsive Original Equipment Manufacturer (OEM), are also some strong factors in the success story of the growth of the Hyosung, making it the most preferred ATM brand in Nigeria,” Dare said.

 ATM Support

According to Dare, Nigeria like other countries such as India, Mexico, South Africa, Indonesia, and Morocco, belong to the emerging markets in cash usage where cash accounts for at least 80 percent of transactions and the annual rate of decline of cash is less than one percent.

“In Nigeria, growth in cash transaction volume and value coincides with growth in branch and ATM networks. The total number of ATMs in Nigeria has always been insufficient for the huge population size of the country. The recent CBN policies have further emphasized the need for more ATMs to be deployed to service the massive under-banked and unbanked population in the country.

As such, the 22,500 ATMs installed in Nigeria by all the banks are still grossly insufficient to serve the needs of the population of more than 200 million citizens of which 52 million are banked with BVN,” Dare said.

Reacting to CBN’s order which mandates banks to dispense re-designed notes through ATM machines, Dare said:“Getting the bank’s ATMs to dispense the newly redesigned notes is not an issue at all. On the part of Inlaks, the unparalleled support we give to the ATM custodians has greatly assisted them to maintain the much-needed ATM uptime to serve their customers. Inlaks has a footprint of over 200 field engineers across all 36 states of the country as such our response time to attend to customers’ requests is efficient.” Over the years, we have equally invested heavily on setting up ATM repair and spares storage centers in Lagos, Kano, Abuja, Ibadan, Enugu and Port Harcourt to improve on our distribution and logistics operations.

According to him, ATMs will continue to play a pivotal role in driving cashless policy.

“The recent CBN directive to all DMBs directing them to suspend over-the-counter pay-out of new notes and mandating them to use ATM channels is enough indication of the future role of ATMs in promoting the adoption of cashless policy.

In spite of the cashless policy of the government, the need for cash is still relevant in Nigeria, as such, the ATM business will continue to thrive through efficient management and innovations that are more customer and mobile-centric. As long as cash is king, the need for ATMs will continue to be inevitable in Nigeria,” Dare further said.

Bank’s Choice of ATM

From 2013 to date, THISDAY research shows that all the new generation banks that have come into the Nigerian market, ranging from Heritage Bank, TAJ Bank, Globus Bank, Providus Bank, SunTrust Bank, Parallex Bank, Lotus Bank, Premium Trust Bank, Titan Trust Bank, Optimus Bank and Signature Bank, use the Hyosung brand of ATM 100 per cent patronage. This is in addition to the old-generation banks that have pitched their tents with the Hyosung brand of ATM, which Dare has vigorously driven through the Inlaks’ platform, to become the number one ATM brand in Nigeria.