ATM usage plunges to 40% amid naira scarcity – KPMG

Business a.m

A new report by KPMG has found that the scarcity of cash in circulation has led to a significant decline in the weekly usage of Automated Teller Machines (ATMs). 

According to the report, “In Pursuit of Value,” which surveyed customers of Nigerian and Ghanaian banks, ATM usage dropped significantly during the year 2023. Customers cited various factors for this decline, notably the lack of availability of cash at ATMs.

The report, which analysed data from over 4,000 ATMs across Nigeria, found that weekly usage of ATMs dropped from 70 per cent to 40 per cent during the reviewed period.

The multinational consulting firm found that ATM usage in Nigeria has significantly declined due to the regular unavailability of cash in many bank ATM stands. This has caused a surge in the use of other payment methods, such as point of sale (POS) terminals. This trend is reflected in the drop in medium digital transactions, which have fallen out of the top 10 most used payment methods. 

“Currently, four in 10 customers report weekly ATM usage, a notable decline from the previous seven in 10 over the last few years. This decline in ATM usage coincides with a significant rise in agency banking usage, with six in 10 customers frequenting bank agents every week,” it stated.

In addition to the decline in ATM usage, the report also noted a rise in agency banking, which highlights the continued popularity of cash among customers. The rise in agency banking, which involves using third-party agents to provide banking services such as cash withdrawals and deposits, indicates that customers are increasingly turning to non-traditional banking channels to access cash. This is driven by the popularity of bank agents, who are available in various locations and provide a convenient alternative to traditional banking methods.

In addition to the decline in ATM usage and the rise in agency banking, the survey also noted a significant increase in digital payments in 2023. Data from the Nigerian Inter-Bank Settlement System (NIBSS) showed that digital payments increased by 52 percent between January and October 2023. This increase was attributed to a “cash crunch” caused by the Central Bank of Nigeria’s (CBN) naira redesign policy, which was implemented in the first quarter of 2023

It stated, “Consequently, digital payments surged, marking a notable 52% increase in total NIBSS Instant Payment transactions by October 2023 compared to January of the same year. This was triggered by the Central Bank of Nigeria’s initiative to overhaul the Naira, aiming to regulate cash circulation and reduce reliance on physical currency.”

In October 2022, the Central Bank of Nigeria announced its decision to redesign the naira, with the aim of encouraging cashless transactions in the country. However, the policy was not implemented in a timely or efficient manner, which led to a decline in economic activity and caused significant difficulties for Nigerians. The rise in digital payments overwhelmed Tier-1 banks, which were not prepared for the surge in transactions. However, fintech companies stepped up to meet the demand, resulting in a change in customer preferences. 

The survey revealed that 58 per cent of respondents switched banks or had reasons to change to fintech companies during the period covered by the survey. This represents a significant increase from the 15 per cent who switched banks in 2022. In addition, 13 percent of retail banking respondents now rely on fintech for their primary banking needs, compared to the 4 percent who made the switch in 2022.