How the CBN is explaining the reintroduction of ATM charges

by Tunji Andrews

The Central Bank of Nigeria has said that the introduction of the N65 charge on “Remote on us” transactions, is in the long term interests of customers, as it would ensure healthy competition amongst ATM deployed, leading to better service delivery. This was announced by Ibrahim Mu’azu, who appears to be holding fort for Ugochukwu Okoroafor as CBN’s Director, Corporate communications.

Mu’azu said that that the apex bank had noted some public comments on its recent circular in respect to charges on ‘extended’ use of third party ATMs. He added that the CBN had noticed a mixed reaction from the public, with most commentators showing great understanding of the rationale for this decision by the banker’s committee.

What is the issue?

The issue in question, being ‘Remote-on-Us’ transactions, is when a card holder goes to the ATM machine of another bank other than his or her own bank to make a withdrawal; seems to have caused a stir, with Nigerians divided for and against the move. Many would recall that in 2012, the CBN in collaboration with the Banker’s committee, transferred the payment of interloping fees from customers to issuing banks. A breakdown of the N100 charge had been a N35 issuer fee which will still be waived by banks, and a N65 fee going to the third party bank.

The ATM market had become a fierce ground of recent with bank of smaller networks being edged out of the bumper earnings they make on 3rd party withdrawals. A bank staff, who works for one of the smaller banks, speaking to our reporter off the record said, his bank had to acquire 300 new ATM machines, as they saw they were loosing the war. He also said that his departmental group head always came under heavy fire from management whenever the numbers were reviewed and it turned out that they were paying more than they were earning. YNaija was even told of sharp practices where a few banks programme their cards not to work at 3rd party ATMs.

The scenario appears to be one where banks with more strategically positioned ATMs are edging out competitors with smaller reach. A case in point, would be Zenith bank, with almost no off-site ATMs (also having not so many branches), compared to Guaranty Trust Bank with off-site and on-site ATMs in large numbers.

Thus it then remains unclear the CBN’s rationale in claiming that this move may encourage more investment, seeing that there is less incentive for banks with smaller ATM reach to deploy; as customers may either have to travel long distances to find their bank’s ATM, or simply pay the N65 charge, at no expense to the issuing bank.

Mu’azu also listed 9 reasons for the reintroduction and 8 benefits, with non speaking directly to a benefit to the bank customer. With benefits like ‘to increase healthy competition among banks’ and ‘to reduce wear and tear on ATMs’ amongst the benefits listed.

Another benefit which may surprise readers was in the CBN claiming that part of the reasons for the reintroduction was to forestall ATM abuse, claiming some customers made countless withdrawals per day. Aside from the fact that no ATM cards in Nigeria have a 5 withdrawal daily limit and that most ATMs pay a maximum of N20,000 per transaction; Another question that remained unanswered was whether banks had stopped deducting COT on each transaction.

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