Five days out of seven a week, most of the over 25 ATM locations are empty because the machines are out of service, out of network, or out of cash. It is the same experience many bank customers face with about 22,600 ATM locations, as Inlaks data show, spread across the country.

Nigeria requires about 60,000 ATMs to meet up with its growing population of 216 million people and a banking population of 106 million adults, according to Tope Dare, executive director of Inlaks, the largest ATM operator in the country, which controls over 50% of the market. 

In 2010, Nigeria had roughly about 7,100 ATMs and the number grew to over 11,000 in 2011 because the CBN mandated the removal of the offsite deployment by banks. This meant that banks would no longer invest in ATMs outside their branches. The CBN seeded the deployment to independent ATM deployers which couldn’t run the project due to the cost. The ban was eventually lifted, allowing banks to invest more in ATMs. The number of ATMs then grew from 11,000 in 2011 to 16,000 around 2016 and 21,000 in 2019. It grew to 22,600 in 2021, where it has remained as of December 2023, an indication that investment in the market has reduced. 

Seventy-six per cent of the total ATMs in Nigeria are deployed by eight banks. Access Bank has over 4,000 ATMs, First Bank has about 3,300, UBA has 2,150 ATMs, Zenith has 2,100 ATMs, GTBank has 1800 ATMs, FCMB has 1,350, Polaris has 1300, and Union has 1,200. A total of 17,200 are owned by these eight banks.

Consequently, there needs to be more ATMs in Nigeria to serve the needs of the banking population, and this has always been the case with Nigerian banking services. 

The estimated branch count of the 24 commercial banks is about 4,500, which is not enough for an estimated 106 million banking population reported by EFInA. The BVN accounts are currently at 60.1 million and active bank account holders are about 135 million. The annual growth rate of ATMs in Nigeria is about 3%-4%, but this has dropped to below %1 in the past two years, as the Inlaks data show. 

Nigeria’s ATM per capita (number of ATMs per 100,000 adults) has also dropped from 16.92 ATMs in 2018 to about 16.15 in 2021. The global standard should be 1,000 ATMs per 100,000 bankable adults. Hence, Nigeria should have about 60,000 ATMs when it is measured against the unique bank customers at 60.1 million. Given the 22,600 active ATMs, there is a deficit of about 37,400 ATMs. As the number of bankable adults keeps increasing and more cards are issued, it is expected that ATMs will decrease in number over time, since the banks are not deploying more ATMs. 

Growth factors for ATMs

In the past, some of the factors that have contributed to the growth of ATM deployment in the country include banks’ profitability. When banks are profitable, they undertake branch expansion and capital expenditure. Banks also deploy more ATMs when their customer base is growing because this means that more cards will be issued, and there will be a need to provide cash and additional ATMs for the customers. Banks that undertake digitalisation initiatives often need to deploy more ATMs. Financial inclusion initiatives also impact the growth of ATMs positively. Banks will also deploy ATMs in areas with improved power generation, this is because the cost of electricity is a major burden for ATM deployment. 

Why investors are looking away from ATMs

Dare says the ATM business in Nigeria is facing its most difficult times due to the high cost of maintenance, growing adoption of other banking channels, foreign exchange crisis, galloping inflation, insecurity, and uncertainty in the ATM policy environment, all of which are driving investors far away from the market.  

In 2016, the exchange rate for the dollar was ₦250. It rose to ₦325 in 2017 and stabilised between ₦330 and ₦360 by 2019. Dare says buying at a rate of ₦380 in 2020 and ₦455 before the Muhammadu Buhari administration left office, impacted the unit cost of ATMs significantly. However, it went from bad to worse when the new government under Bola Ahmed Tinubu dramatically announced the unification of the FX rate, which pushed the official rate to ₦750. The black market price for the dollar is currently above ₦1,500. 

“A machine that we were selling at ‘x’ million naira this time last year, by today we are selling at 3.5x today. This is affecting the hire purchasing cost due to FX. The FX is also dependent on the customs duty and the OPEX. The cost of maintaining ATMs has gone up due to inflation, the cost of transportation, and the cost of spare parts because you have to import spare parts from abroad,” Dare said. 

ATMs are also seeing fewer investments because most investors are paying more attention to other growing electronic channels such as PoS terminals, mobile app transfers, USSD, and other alternative channels consumers use to make payments faster and more convenient. 

“The rapid adoption of digital payment methods is influencing consumer behaviour, leading to a shift away from traditional ATMs in favour of more convenient digital alternatives,” said Olaoluwa Awoojodu, CEO of E-Settlement Limited.

The non-profitability of ATMs is also a big factor for investors. The interchange fee also known as the surcharge fee, is one of the lowest in the world. Today, when a customer visits an ATM he/she is charged N35 after the third transaction. The fee is fixed by the CBN; hence banks cannot change it without approval from the regulator. For investors, fixing the fee does not make sense given that the unit cost for processing ATM notes in Nigeria is one of the highest in the world. Today, it takes a minimum of 150 notes to process the equivalent of $100, said a bank CEO who wanted to remain anonymous. 

According to Dare, to revive the ATM business, the government should consider offering a tax concession. Presently the customs duty on ATMs is over 25%, whereas the duty on solar products is 5%. ATM policymakers also need to de-emphasise cash availability in ATMs and champion the upgrade of the machines to provide cardless payment innovations such as Near Field Communication (NFC). NFC is a short-range wireless communication technology that allows devices to exchange data without a physical connection. Users can initiate a transaction by tapping their NFC-enabled smartphones in front of the contactless reader on the ATM. This connection facilitates secure data transfer between the user’s mobile banking app and the ATM, eliminating the need for a physical card. 

“You can also have a convergence of your mobile to the ATM where you can initiate a transaction in your phone, and you can go to the ATM to consummate it. ATMs should go beyond the regular functions of cash dispensing to more advanced and innovative solutions and contactless payment at minimal costs. ATMs will not die in any country as long as cash is king,” said Dare. 

Earnipay, a fintech solution, founded by Nonso Onwuzulike, allows employees flexible access to their accrued salaries on any day of the month.

Revising the payday cycle

In 2019, Onwuzulike started a recycling company in Accra, Ghana, to reduce plastic waste and enable plastic recycling in the capital city. While running the business, he hired waste collectors and placed them on a monthly payment schedule. However, these employees—all of them coming from informal-sector backgrounds—were unhappy about this. They were used to being paid after a job was completed, or at the end of the workday. The monthly payment cycle left them cash-strapped and unable to match their daily expenses to their income. Consequently, once salaries were paid at the end of the month, many of the workers quit the company in search of other employment.

Eager to stem the high attrition rate among the waste collection staff, the company switched from a monthly payment schedule to a flexible one, allowing the workers to be paid more frequently—weekly or bi-weekly. The change increased their productivity and fewer workers jumped ship. 

It was a light-bulb moment for Onwuzulike. He went on to survey 100 formal employees within his network to find out how often they ran out of cash before payday and what their employers did to alleviate their financial difficulties. 

Onwuzulike’s original intention for Earnipay was to build a salary advance solution—in keeping with similar solutions already in existence in Nigeria, some of them powered by traditional banks. But plans changed when the results of the 100-person survey showed that 90% of salaried employees would rather have flexible access to their accrued salaries. 

“People don’t need payday loans or salary advances to fund their lives; they just wish to be paid more frequently,” Onwuzulike said on a call with TechCabal.

Earnipay is currently in beta, with Onwuzulike serving as CEO, Busayo Oyetunji COO, and Joshua Ajayi CTO. As Onwuzulike tells TechCabal, all three of them consider themselves co-builders of the product. 

“Works like an ATM”

Earnipay is unavailable to individual employees, so employers need to sign up and onboard their staff. The Earnipay app allows employees to withdraw up to 50% of their daily accrued salary as earned at the time of access, at any time of the month. Earnipay funds the withdrawal. 

For example, if one dips into their salary on the ninth day of the month, it means they’re entitled to half the amount they’ve earned for working nine days. At the end of the month, their employer deducts from their salary the amount withdrawn, uses it to refund Earnipay for initially funding that withdrawal, then pays the employee the balance as their salary for the month. 

Transaction-fee tiers are attached to withdrawals. Withdrawing ₦5,000-₦10,000 attracts a fee of ₦500, and withdrawing ₦10,001-₦50,000 attracts a ₦1,000 fee. 

“It works just like an ATM,” Oyetunji  said.

Intersecting the formal and informal workforce

The informal sector makes up about 80.8% of the workforce in urban Africa. In Nigeria where Earnipay operates out of, the sector makes up over 70% of the workforce. 

When Earnipay piloted three months ago, Onwuzulike envisaged that the solution would be useful only for low-income staff and informal employees, but the income profile of the app’s users vary, Onwuzulike claims. “One of our customers earns a million naira a month,” he said.

So far, 17 companies have signed onto the app as active users and their employees have used Earnipay over 400 times. 

No doubt, there are upsides to shorter payment cycles. For example, an employee can see their salary breakdown from day to day on the app, and unlike a loan or salary advance, which are borrowed funds, an Earnipay withdrawal is earned wages.

Still, some of the threats inherent in loan-taking and salary advances may come up here as well. For instance, an earner who is unable to manage their personal finances may end up dipping into their salary before payday for the most frivolous reasons, and even after receiving their salary balance at month end, may still struggle to control their spending.

Responding to these concerns, Oyetunji said, “The main issue here is, we’re not financially educated. Whether you get your money at the end of the month or access it [daily] as you work, if you’re not financially disciplined, Earnipay may not make a difference to your spending habits.”

Scaling up

At the height of the COVID-19 pandemic last year, Africa’s formal and informal economies took hits. Six percent of formal workers were out of work in Malawi, and in Nigeria, that figure climbed to as high as 45%. Now, as Africa adjusts to the reset forced on the entire world by the pandemic, financial well-being across all employment sectors has become more important than ever. “We’re in a financial health pandemic,” Oyetunji said. “Quality of life is reduced because people can’t fund their everyday needs. How can our expenses be on-demand yet access to salaries earned isn’t?”

The Earnipay team began building the product in July, received pre-seed funding of an undisclosed amount in August, and took their Minimum Viable Product (MVP) to market in September. 

Commenting on Earnipay’s plans for 2022, Onwuzulike said, “Our goal is to partner with employers to improve employee financial well-being. We provide tools for income earners to make better financial decisions and improve their quality of life. In addition to flexible salary access, we provide financial education to advise employees on best practices to manage their finances, and other products to assist them daily.”

Of course, my problems didn’t end with paying for my most recent burger. I was still going to be in Nairobi for at least a week, and I had places to go, things to do, and people to meet. How was I going to function without money? I had a brief lightbulb moment when I remembered that GTBank had a branch in Kenya. Or did they? My elation dissolved into irritation when I was told that both banks don’t actually talk to each other. The GTBank in Kenya had no way to interact with your Nigerian GTBank account. I remember thinking how incredibly absurd that was.

There was also that time when we hired a staff writer in Nairobi, and I remember that paying his salary was a nigh Sisyphean task that saw me attempt all kinds of methods to get the money across. I used PayPal and Bitcoin via Bitpesa. Both came with painful exchange rate haircuts. At some point I was tempted to get on a plane and go and hand them the cash personally. In the time we had that writer on the team, I always hated the end of the month.

In January 2018, my GTBank debit card got “swallowed” by an ATM in Kileleshwa while I was trying to help a friend withdraw cash that they had sent to my account in Naira, so that I could physically withdraw it, deposit it into my Mpesa, and then finally send it to a vendor they’d done business with in Nairobi. Na wa.

Besides Western Union, there is no real way to move money between African countries. I don’t know a lot about payments, but as a user of financial services, this just feels like an absurd problem to have in 2018. A problem that as Qz Africa editor Yinka Adegoke writes, is an untapped opportunity for money transfer firms. London-based World Remit is the star of that piece, but I feel like startups like Paystack and Flutterwave will become part of that narrative soon.

Until then, it’s either pay exorbitant Western Union fees, hope for the best with Bitcoin, get a haircut on PayPal, or go around looking for your country man in the African country where you need to send someone money. A luta continua.

PS: I have been told that Ecobank branches across Africa talk to each other.

According to an article by the Daily Trust, the people of Potiskum, Yobe State, have found a way to get cash despite Boko Haram’s disruptive activities in the state. They’ve adopted Point Of Sale (POS) machines, instead of ATMs, for cash withdrawals.

Customers make bank transfers on the POS machines using their ATM cards, and the operators hand over the corresponding amount in cash. In exchange, these POS operators keep a certain percentage of the withdrawn amount as their commission. Little wonder that their system of cash dispensation is touted as a form of mobile money.

The Central bank of Nigeria deployed POS machines in the country 2012, as part of an effort to encourage Nigerians to adopt a cashless system of payments. Potiskum, a city in North-Eastern Nigeria, has seen traditional methods of cash withdrawal deteriorate, and these POS bankers have filled the void. Home to the largest cattle market in West Africa, the city is always filled with traders from far and wide.

At the moment, there are only three banks – Keystone Bank, First Bank and Bank of the North- servicing the area. A staff of one of the banks admitted the bank’s shortcomings in fulfilling the cash needs of the town and its markets and traders. This situation has fueled the growth of the POS cash transfer business, and there are several POS operators scattered across the city.

What makes money mobile? This article describes mobile money with recharge card sale as an example. Remember when you could sell your recharge card for money at any nearby vendor? Good times.

“I started the business out of desperation to help people overcome cash shortage in the town. It wasn’t profitable at first, but with my little accountancy background, I later converted it to a more profitable venture. Now, I have five staff and we all depend on this job.” says Ali Abba Ya’u, a POS operator in Potiskum. Another POS operator said he got as high as 100 customers on some days. Yet another said he collected a 2% commission on every N10,000 withdrawal.

A few customers expressed concern over the system’s lack of government regulation. They believe that government approval will provide some semblance of security for the trade.

This is in contrast to the opinions of individuals in the fintech sector concerning mobile money. They have accused the government of over-regularising the industry, and crippling innovation.

The news reminds me of the 21 days I spent in NYSC camp without an ATM machine. One of our options was giving our ATM cards and pins to a stranger leaving the grounds. This person would then use an ATM machine in town and return with the cash. Several POS bankers offered their services for a 5% commission. This was, of course, a better and much more convenient solution, even with the network challenges.

Government intervention or regulation aside, this system is making the lives of the people in Potiskum easier and they have earned this reprieve.

You’ve scoured the breadth of the market looking for a pair of jeans that have the perfect length-to-waist width ratio for your slender 6”6 frame, at an exorbitant price point: N10,500.

You offer N3000, just like you’ve seen your mother do, when conversing with those okra and tomato sellers. The trader offers you N9,500 as his final offer. You sense he’s desperate to sell. You make to leave the shop, as you have an appointment. Or so you want him to think. He calls you back, making an offer of N7000, to which you scoff, and make your final offer of N4000 – take it or leave it. He pauses for a while, sulks, and begs for N5000. You open your wallet, in a bid to drop N4500 in his hand and walk away victorious.

Wait.

“Where’s my money?”

Then, and only then, it hits you.

You were hungry, and stopped by Salamander Cafe, on your way here, and forgot to make a withdrawal.

Ugh.

You say a silent prayer, and ask if he has POS, or if you can do an online transfer, and he can release the jeans when he’s seen the transaction alert. He stares at you blankly, like “what on earth is this guy on about?”

You apologise and ask to go use the ATM before picking up the jeans.

As soon as you step out of the market complex, you spot an Ecobank ATM.

The day is saved!

Thank Heavens.

Zoom out.

You notice a horde of grumpy people, all waiting for a turn to use the machine. As you approach, wondering how long it’ll take, 6 women stand up from a hidden corner, and inform you they were here ahead of you.

Sigh.

********

It’s finally your turn.

Insert card. Type Pin. Select amount.

After what seems like an eternity, you hear the all-too-familiar whirr.

Money’s coming!

Music to your ears, along with the beep on your phone, informing you about the transaction.

Ivan Pavlov’s disciples hold the opinion that the sounds we hear at the ATM are artificially generated as a reassurance that money is on the way, much like otherwise silent digital cameras and electric cars produce shutter clicks and engine noises simply because we’ve become accustomed to them.

A now defunct website, Humans Invent put it this way, “The assumption most people jump to is that the sound is produced by rollers delivering the notes to the collection slot. In fact, the sound is an entirely artificial addition to the process. The noise is produced by a speaker and purely included in the transaction to reassure you that your money is on its way. Without the added noise, the ATM would be practically silent with its moving parts on the other side of a brick wall”, in response to which a reddit thread was started, and several people who claim to have serviced these mystery machines came forth to refute the earlier statement, “I serviced ATM/ABM machines for over 4 years, there is no artificial sound, the machines really are that loud (and about 10 times louder with the vault door opened) the belts that are spinning to deliver the cash from the cash cassettes to the customer are by no means “practically silent.” And there is no f***ing brick wall in the MIDDLE of the damn machines.”

My curiosity drove me to YouTube, where I found a video describing how ATMs work, as well as a few articles here and there, where there was absolutely no mention of any speakers producing artificial sounds. Then again, maybe the information was excluded by the top secret Intergalactic ATM Consortium, to keep us in the dark about the inner workings of this mystery machine.

I get to buy my jeans, either way.

Photocredit: Jev55, Curtis Perry via Compfight cc

If you walked up to some ATM-style contraptions on the streets of Nairobi this evening, with your international Visa card hoping to get cash, you might be confronted with something maybe more beautiful; water. A Danish pump and water solution provider has developed a machine that dispenses clean water in Nairobi, ATM-style. And they have placed the at strategic locations across town. Why? Because clean water could be hard to come by up there. And really what’s cooler than water from Automated Water Dispensing Machines? (I totally just made this up – the name, not the invention – and the inventors are welcome to use it anytime. With full credit of course).

What else has been going on?

The sun is brighter at Dot Com Zambia today

Money came in the door. The Zambia-based ecommerce platform received $500,000 from venture finance and private equity firm, Kukula Capital and eVentures Africa Fund.

Huawei joins AU to make ICT reach farther in Africa

Huawei announce today that it will co-operate with AU in the areas of ICT development, infrastructure, mobile broadband, fixed broadband and other areas of ICT. The goal is to enhance Africa’s ICT capability and infrastructural development.

Even a bigger sun turns its face to Smile telecoms today

The 4G LTE broadband provider got a $365 million raise today. It was part equity investment and part debt financing. Smile has presence in Nigeria, Tanzania and Uganda, and plans to expand to DR Congo with new cash injection.

If you school at OAU, RSUT or Futa, you can begin Ambassadorial gym sessions now  

Intel has announced its Student Partner Program, and only students from these schools can apply. At least for now.

CcHub announced its marketplace for developers today

The Techsquad. It is a team of technologists that can be contracted to work with local businesses in Nigeria. So, rather than go to elance to contract a ninja from Phillipines, CcHub is presenting the lineup of the best developers in Nigeria.

We saw live pictures of Nokia’s Android phone today

And it’s nothing like the joke that is the Nokia X. This is full ono submission to the Google borg. The live pictures show the phone with a 5″ 1080p touchscreen, the primary camera and the LED flash aligned vertically on the back, a thin chassis and what appears to be a unibody design

Featured on TechCabal:

The struggles of the Nigerian developer

Our guest writer, Adim Ofunne has a long running joke. “As a developer, all you need to change the world is a brain and a laptop,” he would tell his family and friends any chance he got . But he had some more learnings to experience. Learnings that would have him add one more line to this joke.

Don’t miss:

Muzinda Hub develops free websites as part of global education campaign, calls for support – TechZim

Going to school shouldn’t be a luxury, but the reality is, it still is. That’s one of the many disappointing aspects of a world where technology has become ubiquitous and every other problem seems to have a digital solution.

Credit and debit cards account for 70% of payments in Brazil. Should you be planning a trip to Brazil ahead of the World Cup beginning next week, you want to follow these 5 simple tips to ensuring the security of your finances.

Use only CHIP and PIN cards

During the course of your stay in Brazil, avoid using any of your old cards with magnetic stripes, as they have a higher chance of getting cloned. CHIP and PIN cards are more secure and harder to clone than the older magnetic stripe cards. Most banks in Nigeria now issue CHIP and PIN cards anyway, but it’s a good idea to check with your bank before travelling to Brazil.

Never handover your cards at restaurants or stores

When at restaurants or stores, do not handover your cards to attendants but rather, ask them to bring the POS terminal and charge it in your presence. By doing so, you reduce the chance and temptation of possible criminals doing a quick clone of your cards.

Pay only with wireless PoS terminals

Brazilian credit card cloners are infamously exporting malicious software from Eastern Europe, using them in local PoS terminals and PIN pads. Be sure to avoid PoS terminals connected to serial or USB ports, as they are at higher risk of being infected. Make sure you are paying using only at wireless POS terminals.

Beware of fake ATMs

Brazil is home to over 160,000 ATMs, one of the highest in the world. This means more opportunities for local criminals to ingeniously sabotage them. Some reportedly go as far as installing entirely fake ATMs in random places. Better safe than sorry, don’t even bother using ATMs that aren’t located within banking premises.

At ATMs, enter your PIN with keypad covered

Some of the less software-skilled ATM hackers rely on hidden cameras to sabotage ATMs. As ridiculous as it may sound, chances are that a lot of the ATMs you will use in Brazil could hidden unauthorised cameras installed. When you are entering your PIN, be sure to cover the keypad with your hand.

Source: Kaspersky Labs

Photo Credit: Håkan Dahlström via Compfight cc