The Central Bank of Nigeria (CBN) and others in financial circles have been defending the return of Automated Teller Machine (ATM) charge, which was N100 before it was abolished in 2012. It was restored few weeks ago at N65 and it will take effect from September 1. Depositors are not impressed with arguments for its return. They perceive the policy as a ploy to shortchange them, reports COLLINS NWEZE.
The reintroduction of N65 Automated Teller Machine (ATM) charge took many bank depositors by surprise. The N100 ATM charge was abolished in 2012. But, a few weeks ago, the charge was reintroduced but with a different amount of N65.
Depositors believe its return is another policy targeted at further enriching the banks and impoverishing them.
But the Central Bank of Nigeria (CBN), in a statement last week, said the policy was intended to enhance the process of ATM transactions and ginger lenders to invest more in the machines. The CBN also wants customers to understand that banks need the charge to improve ATM services and achieve the seamless cash-less banking they have been asking for.
The CBN said it noted some public comments on its recent circular in respect of fees/charges on the extended use of other banks’ ATMs. These reactions, it said, had been mixed with most commentators showing great understanding and others expressing clear lack of understanding of the rationale for the decision of the Bankers’ Committee.
To experts, N65 per transaction on remote-on-us ATM cash withdrawals is a step in the right direction. Remote-on-us are transactions done by a card holder on another bank’s ATM.
The policy, which will take effect from September 1, is generating mixed reactions.
Managing Director and Chief Executive Officer of Financial Derivatives Company (FDC), Mr. Bismark Rewane, described the reinstatement of the charge as appropriate.
He said it was wrong for the CBN to have removed the charge in the first place. Rewane insisted that the charge was necessary given that the dynamics of banking are such that banks would continue to invest and re-invest in infrastructure to ensure that they continue to provide quality service to customers.
He noted that banks are carrying the burden of paying the Asset Management Corporation of Nigeria (AMCON) levies; the Nigeria Deposit Insurance Corporation (NDIC) premium, adding that the commission on turnover (COT), which is also a cash spinner for lenders is also almost being removed by the apex bank.
An Executive Director at Sterling Bank, Abubaker Suleiman, said that the re-instatement of cost recovery for the use of other banks’ ATM was intended to limit the cost incurred by banks and does not constitute profit.
He said: “Banks are still left with the burden of three free withdrawals a month, which translates to N195 monthly charge. While this cost is less than the income on medium and high value accounts, it is sufficient to render most low value accounts unprofitable, which will force banks to discontinue marketing such accounts.”
Suleiman argued that the last thing the country needs at this time is a rollback of the financial inclusion campaign, which has resulted in a noticeable uptick in customer enrollment by banks and has created access to financial services for more than one million Nigerians in just over a year.
He stressed that the previous policy on limitless withdrawals might have benefitted those who were already financially included in the short-term but would have harmed mostly poor people with banks scaling back investments for mass market and refocusing on the middle class.
Furthermore, emphasised that the burden on banks arising from the combined weight of NDIC premiums and AMCON levy as well as the increasing cost of Cash Reserves gave little room for pushing additional cost to banks.
He added that these costs has become a source of concern for investors and could have negative impact on capital flows. “When it comes to the cost of using ATMs, Nigerian banking customers still have one of the best deals you can find in any jurisdiction” Suleiman averred.
But chairman of the National Humans Rights Commission (NHRC) Chidi Anselm Odinkalu, kicked against the policy, saying does not benefit the poor and should be discouraged. “So the CBN Governor has decreed that each ATM transaction shall henceforth attract a charge of N65. Clearly, providers of banking services exist to make profits for their shareholders. But regulatory powers are a public good. There is a legitimate question to be raised here: (how) does this serve the public good?,” he queried.
Odinkalu continued: “Nigeria is a country that is heavily under-banked; banking penetration is low; retail banking is poor in many places. For these deficiencies, customers are to be levied what is in effect a financial services tax of N65 per withdrawal. And this in a country in which no bank recorded a loss in the last year. I do understand ATMs need a back-end. But if the banks are already profitable, while introducing the fee”.
Does anyone know the figures for average trip to a cash-point per customer per annum? That would give a sense of ? how much this tax is worth. “With the level of hardship we have here, how many Nigerians can afford this tax? I would like to get a legal team to review this because there may be room to get the CBN to justify itself under the applicable rules of judicial review,” he said.
Central Banking Report, international online researchers, said the CBN is defending the ATM policy because it feels the reintroduction of fee will hinder abuse of expensive ATMs and promote its cash-less policy. It also said fee was abolished in 2012 to encourage use of ATMs and promote the cash-less banking initiative.
According to Chairman Rockview Consulting Limited, Kingsley Obinna, pressure on some banks’ ATMs is likely to rise with the new policy. This, he said would lead to poor service quality and loss of fund by customers.
However, he said since ATM has become lucrative, it more banks which found no reason to expand their ATM figures will be forced to invest more in new machines.
Also, he said customers of banks with limited number of ATMs will be disadvantaged if they have to rely on their banks which may be far away from their homes.
For him, lenders are finding ways to defray the burden of the cost from themselves despite the huge billions declared as profit every year from credit interest and bank charges.
Also an electrical parts merchant in Balogun, Lagos, Emeka Onyewuchi lamented that apart from the fact that the reintroduction would impoverish ATM users, it would also discourage people from using the ATMs.
Likewise, a textile dealer based in Oshodi, area of Lagos State, Michael Obi, said it was surprising that the CBN could take such a decision when people are been encouraged to go cashless.
He called on the apex bank to reverse the decision as it capable of sending wrong signal the banking populace.
Speaking in an interview in Lagos, Director, Banking and Payment System Department, CBN, ‘Dipo Fatokun, said the policy will not affect the apex bank’s financial inclusion campaign. He also insisted that the policy was not a re-introduction of charges.
Fatokun said prior to the amendments in December 2012 it used to be N100 on any remote-on-us withdrawal. But he said the N100 was removed then so that people would be encouraged to go to other banks’ ATMs.
“But the truth is that, as we said in the circular, that of the N100, N35 goes to the payment bank, which has now been completely waived. But in going to other ATMs to make withdrawals, your bank, which is the acquirer bank, incurs a cost of N65 which they pay to the switches and the owner of the ATM that you are using.
“Between 2012 and recently, when the review was done, it was discovered that people have actually turned ATMs into their personal purses because nothing is charged. Somebody needs N500, N1,000, he will go to an ATM to withdraw, such that in a day, some people can patronise ATMs up to five times,” he said.
According to him, this has created a huge cost burden for the banks that issued the cards. It was the major reason the central bank decided that even though remote-on-us would still be encouraged, a customer can go to other banks’ ATMs and withdraw up to three times and there would not be any charges. But the customer would be charged N65 when he makes the fourth withdrawal.
“Of course, if you go to the ATM of your bank, you are free to withdraw as much as you like. So, it does not discourage financial inclusion,” Fatokun argued further. The central bank had explained that it took the latest decision as a result of the unintended consequences on banks.
It had said the earlier arrangement had resulted in substantial cost burden incurred by banks in defraying the cost for the service. According to the CBN, the re-introduction of the fee was also to cover the remuneration of the switches, ATM monitoring and fit-notes processing by acquiring banks.
What the policy says
The CBN had reintroduced Automated Teller Machine (ATM) fee it scrapped in December, last year. The apex bank said from September 1, customers will commence payment of N65 as against the N100 fee charged previously.
Fatokun, who made this known in a circular, the re-introduction of Remote-on-us ATM cash withdrawal fee of N65 per transaction, is to cover the remuneration of the switches, ATM monitors and fit-notes processing by acquiring banks.
He said the new charge shall apply as from the fourth transaction in another bank’s ATM. “The fee shall apply in “Remote-on-us” withdrawal (in a month) by a card holder, thereby making the first three (3) ‘remote-on-us transactions free for the card holder, but to be paid for by the issuing bank. September 1, 2014 shall be the effective date for the implementation of the new fee,” he said.
However, all ATM cash withdrawals on the machine of issuing banks shall be at no cost to the card holder. He advised banks to conduct adequate sensitisation to their customers, on the introduction of the new fee.
The Nation’s findings showed that the top five banks – FirstBank, GTBank, Zenith Bank, United Bank for Africa and Access Bank – are worst hit by the removal of the ATM fee. However, it is expected that the reintroduction of the fees is a plus for these lenders and would boost their revenue base.
For instance, FirstBank of Nigeria operates an extensive distribution network with over 750 business locations (623 branches, 61 quick service points and 69 cash centres/agencies), over 2,397 ATM’s and over nine million customer accounts. The bank has five subsidiary companies, providing a comprehensive range of financial services. Equally, banks will fewer ATMs are likely to lose some of their customers as they drift to the bigger banks over the policy.
