Tuesday, 12 April 2016

Draft Bill to ease ATM users’ hardship

By Dr. Ahmed Adamu

Yesterday, six primary school teachers died on their way to Katsina to withdraw money from Automated Teller Machine (ATM). They received their salary alert, and because there is no ATM or Bank branch in their town (Danmusa), they boarded a commercial vehicle to go to Katsina (114 kilometres away from their town) to withdraw their little salary, not knowing that they were drawing closer to their end. The six primary school teachers died on their way to withdraw their salary.  They had a ghastly motor accident, and will never access the money.

In my recent articles titled ATM Wahala: The Way Forward, I emphasized on the need to take immediate actions and policy review to address difficulties associated to access to finance. The above sad story is just one out of many unfortunate incidents relating to the inadequate infrastructure in financial sector. In my article, I gave some suggestions on the way forward, and as such, I drafted a bill regarding this issue to the National Assembly as a matter of national importance, and I will forward it to a senator in the National Assembly for review and presentation before the National Assembly.  This is the letter I plan to send to the Senator, you can give your inputs before I send the bill to the senate:

Dear Senator,

As you may be aware that yesterday in Katsina state, six primary school teachers died on their way from their hometown (Danmusa) to Katsina, which is around 114 kilometres distance, in order to withdraw their salary from Automated Teller Machine (ATM). If ATM machines and other means of accessing finance are available in their locality, these people do not need to travel to anywhere else to access finance. People suffer so much just to access their own money. For example, in Katsina Senatorial zone, only three towns have Automated Teller Machines (ATMs), and these are Katsina, Jibiya and Dutsinma, and all the remaining eight local governments and their towns do not have ATMs, and people from these localities have to travel to the three major cities to access finance. This leads to serious hardship and congestions in financial access points. Some people have to spent money and hours to come to the major cities, and they have to wait under scorching heat for hours, many without eating. In many instances, these poor people do not achieve their objective of getting the money. The ATMs many times fail due to technical or money unavailability issues, and it takes time to fix these issues in many access points.

As a result of congestion in the cities, people who are residents in the major cities then find it difficult to access finance, especially when salaries are paid, because, that is the period when there is acute overcrowding on monetary access points as those living in other towns have to come to the city to access the little salaries they receive. In societies like ours, people have to wait for their salaries, and when they receive the salary alert, they will not spend a minute before they go to the ATMs. This is why the ATMs are congested in this period.

The fear of this crowding and difficulty in accessing money make people to keep cash at homes and in their wallet, and this reduces the government’s ability to control the economy, and increases risks in the financial sector.

There are many institutional implications and untold hardships relating to the inadequacy of financial infrastructures. I am worried about the physical hardship and loss of lives that these inadequacies cause.  You can look at the photos below to have a glimpse of these hardships. Many of the victims cannot voice out their concerns, and that is why I am writing this letter so that we can speak out on behalf of these people and to ensure that the relevant laws are reviewed and actions taken to ease the hardship people undergo.

In my state (Katsina), almost all public servants receive their salaries through their bank accounts, and they all have to come to the ATM machines at the same time (end of the month after government salary) to withdraw money. And because most of the withdrawal are not above N50, 000, they must withdraw it from the ATM mouth, according the new decongestion policy by Central Bank Nigeria (CBN). This means majority have to line up before the ATM machines to get money. However, joining the long ATM lines is not the only point of sympathy, the frustrating thing is to wait on the line, under scorching heat, and only to come to their turn and the ATM will tell them “Unable to dispense cash” or “temporary out of cash” or “issuer inoperative”, and before the machine can come back to work, it might take long time or the next day depending on the bank and its location. Another serious difficulty scenario is when customer tries to withdraw the little money in his/her account, and the machine refused to give the cash and his/her account is already debited, in this situation, the customer is left stranded.

Similarly, the reason why most Banks cannot maintain constant availability of money is because of the poor quality of the money they receive. Some of the paper money CBN gives to the commercial banks are below the ATM standard, and as such, they cannot be placed on the ATMs. This is why despite money availability in Banks, they cannot fund the ATM machines. And if they place any paper currency that did not meet the ATM standard, the machine will get jammed and stop working. 

Another reason why ATMs fail is because of technical error on the server of the Banks, thereby making it impossible to execute any automated transactions. Many times, one wonders what is the role of the so called ATM Monitoring Team (AMT) and their supervisors, who are instantly alerted of any failure or cash unavailability on the ATMs? Sometimes, there is serious reluctance on the side of the AMT, and since they receive special allowances, then they shall be able to promptly respond and address all ATM issues even on the weekends.

Another limitation of ATMs is that, no ATM can be uploaded with over N1m after 6pm to minimise risks of theft and security breaches. As a result any 10 big customers can exhaust ATM in a night, and then subsequent customers cannot access cash from the same machine. Even if all ATM issues are to be addressed, the number of customers have far outnumbered the ATMs.

Solutions and Prayers:

Because of increasing dependence on ATMs in financial payments, which account to up to 93.3% of transactions on e-payment channels in recent years, the following prayers/solutions are proposed to address inefficiencies and difficulties relating to access to finance in Nigeria.

1.       1.       Cashless Economy: Now, whether we like it or not, no matter how our society resist change, there are changes that must be embraced. We have to change our payment systems in all payment points or at least provide options for automated payments via Point of Sale (POS), and this shall be provided in all shops, filling stations, restaurants, commercial offices and business, public institutions, educational institutions, etc. There is need for more incentives to encourage automatic payment systems in local markets and businesses. Therefore, the Banks and other Financial Institutions Act 2004 (BOFIA 2004) shall be reviewed to mandate commercial banks to provide free POS devices to business customers, and reward such customers for using the POS device for certain amount of transactions. We should not ascribe to reverting back to cash down salary system, because, without money in Banks, government will lose its power in controlling the economy. If all payments are done automatic, then there is no need for this long lines on ATMs, because we don’t need cash to live, you only need card to live.

2.       2. Reinforcement of Penalties for Banks’ negligence and inadequacy:  The penalties identified under Sanctions on Erring Banks/e-Payment service Providers for Infractions of Payments System Rules and Regulations should be reinforced. Some of these penalties resulting from any avoidable technical error and money unavailability on ATMs are not strictly reinforced. This is why banks care less about efficiencies of their payment systems and access points. For example, if any ATM is down for 72 hours without cogent reason, the bank will pay penalty of N100, 000, and if they refuse to respond to an ATM customer’s complain within 24 hours, they will pay N100, 000 per day.  Considering the frequency of the use of the ATMs, the chances of their breakdown might increase, and this underpins the need for close monitoring. The BOFIA 2004 shall be reviewed to increase this penalty to N200, 000 and the penalty shall commence 24 hours after ATM breakdown to discourage negligence and encourage efficiency. The sharing ratio of these penalties as specified in the BOFIA 2004 shall be reviewed to include the victimised customers to serve as compensation. So that the victimised customers will get 10 percent of the share of revenue from the penalties. Victimised Customers are those that 72 hours (or 24 hours if reviewed) after ATM breakdown attempted to withdraw from one of their bank branches and were not successful due to technical or money unavailability issue or those whose complains were not responded to within 24 hours.

3.       3. ATM Users Associations: Most of Bank customers are not aware of their rights and the laws, and they are subjected to unnecessary hardships, and the trauma such ATMs and Bank inadequacies caused them are not compensated. Therefore, the BOFIA 2004 shall be reviewed to establish and recognise Association of ATM Users (AAU), which will serve as the voice of all ATM users, so that the AAU will be monitoring performance of ATMs, and they should have mobile numbers of the AMT officials and to report to them any failure or issue on ATMs that they may not know about it, and they should follow up to ensure all issues are rectified immediately. The AAU shall be responsible to hearing grievances and complains from all ATM users and ensure that all complains are addressed within 24 hours. The AAU branches shall be provided in all towns and villages. They should also help the CBN in checkmating the inefficiencies of the commercial banks.

4.       4. Local Access to Finance: The BOFIA 2004 shall be reviewed to permit AAU and qualified individuals to use private cash to meet local cash demand using POS, and upon submitting their transaction reports to the respective banks, they receive their money back with some incentives from the banks as compensation for providing the financial services.  Under this reviewed act, any customer that want to withdraw money, he/she can go to the AAU branch or certified individuals in his/her town or village, and his bank account will be debited with exact amount he entered on the POS, and he will receive the same cash amount from the AAU officials or the certified individuals. AAU and other certified individuals shall be supported by the Act to source and hold enough cash to settle local demands. This will reduce the hurdle of travelling to Major Towns to withdraw money. Alternatively, the mobile money platforms can be included in the Act, where e-float can be exchanged for cash, and vice versa. Under this platform, people can hold e-float as token for cash, and they use it for saving and withdrawing cash and other payment services.

5.       5. Private ATMs: The BOFIA 2004 shall be reviewed to permits private individuals to operate independent ATM, so as to provide for much ATMs and provide business opportunities. Private ATM business is a highly paid business, where individuals can buy their own ATM, and charge customers per transactions, and later get their money back from Banks. For example, if you charge N200 per transaction, and your ATM is placed in strategic locations, you can get up to a thousand transaction in a month, which means you will have a net revenue of N200, 000 per month. So, allowing this kind of private business will decongest major cities and ATMs, and will make lives easy, and will create business opportunities.

6.       6. Review of CBN Banking hall decongestion policy: The CBN’s N50, 000 restrictions for inside banking hall transactions shall be reviewed for the meantime, so that even a transaction of N1000 can be executed inside the banking hall, so as to decongest the ATM points.

7.       7. Improve Quality of Currencies in Circulation: The CBN should improve the quality of currency in circulations, especially those held by the commercial banks, so that ATM errors caused by poor currency quality will be avoided. Any currency that do not meet the required standard is supposed to be replaced. There should be a nationwide advocacy on proper handling of currency. The good handling of currency can be reinforced by reviewing the BOFIA to include section that mandate commercial banks to not accept dilapidated or unfit notes, and any customer holding dilapidated cash has to submit such for reissue through the commercial banks after paying a penalty. This will discourage misuse of the currency and reduce the cost of currency reproduction.

8.       8. More ATMs: Finally, the Banks shall be encouraged to install more ATMs in all towns and villages, and they shall be efficient and responsive to all technical issues and cash unavailability problems promptly.  The BOFIA 2004 shall introduce the ratio of ATM per customers, so that 500 customers can have one ATM.

Dr. Ahmed Adamu
Petroleum Economist and Development Expert
Pioneer Global Chairperson, Commonwealth Youth Council
University Lecturer (Economics), Umaru Musa Yar’adua University

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