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Dr P. U. C. Agundu
Department of  Banking and Finance
 Rivers State University of Science and Technology, Port Harcourt

and H. N. Ozuru 
Department of Marketing, University of Port Harcourt

This paper examines the upsurge and widespread application of automated teller machines (ATMs) in some top-ranking banks in Nigeria. It symbolizes the wind of change blowing across the the financial services sector (FSS) and allied strategic institutions, with characteristic acceptability, accessibility, and multifunctionality. It is however imperative that inherent technology/operations risks be effectively contained so that sustainable optimal economies could be attained to the utmost satisfaction of concerned stakeholders.

Keywords: Access, Automation, Multifunction, Risk, Systems.

For several decades, Nigeria as a predominant consuming society was not disposed to buying goods on credit or with Credit cards. The norm has been to operate exclusively with cash. This approach seemed to be more conservative and members tend to think more carefully before spending their money. Today, the tide has changed as many banks now extend credit cards to individual qualified customers, courtesy of automobile functional automated teller machine ATM systems. Many financial institutions and other retail institutions (like petrol filling stations and department stores) now offer customers credit cards in order to turn them into more loyal clients. Hardly, therefore, would any well meaning individual/ institution contest any move that technology is very crucial and strategic to the economic growth and development of nations.

Through these technological developments the market for credit cards promises to be as vast as the cell phone phenomenon of the early 2000 era. Thus, there is still incredible high demand for existing/new products and opportunities for huge profits in the market cannot be so shortly explored, exploited and exhausted. The experiences of some leading banks in the introduction and operations of ATMs are quite revealing in this regard. They are chronicled in the next segment relative to selected top-ranking commercial banks like First Bank of Nigeria (FBN) Plc and Diamond Bank Nigeria (DBN) Plc.

Nigerian Banks and ATM Wind of Change
The ATM systems of FBN and DBN date bank to 2003, when they proudly announced the launching of local debit card point-of-sale (POS) terminal in collaboration with Chams Nigeria Limited and Interwitch Nigeria Limited. Under this agreement FBN introduced its Firstcash cards product designed to be accepted at merchant outlets for the purchase of goods and services. The POS terminal is connected to Interwitch via communications links such as telephone lines, and with that the first ATMs accepted a “single-use” token or voucher that was retained by the machine. Then came the idea of personal identification number (PIN), which is stored on a physical card for necessary security verifications when retrieving money in an ATM system. It is widely held that the first talking ATM with (private audible instructions for the blind) was installed in Canada in 1999, while the United States (US) had it in San Francisco in the same year. By the year 2005, the number has grown to approximately 30,000 in the US alone.

With respect to banking institutions, Ozuru and Kalu (2006) identified that ATMs allow a bank’s customer to make cash withdrawals and check their account balances at anytime without a conventional teller. With a functional ATM at the Point-of-Purchase, the cardholder is expected to slot the Credit Card (debit card or bankcard) in for contact with the magnetic strip. Consequently, it instantaneously requests for the PIN which provides security and ensures validity. If the cardholder’s account is sufficiently funded to absorb the value of the transaction, it is immediately debited and the merchant receives value within 24 hrs.

When the PIN is properly inputted, a list of choices of transactions is displayed to the customer, through which the customer completes the required transaction. If the customer’s desire is to withdraw cash, the cash is dispensed through a feeder slot. If deposits are to be made, the customer feeds the deposit envelops into the deposit slot when cued by the machine. When transactions are completed, the customer receives the receipt while the ATM retains its own receipt for records of the transactions (Ozuru and Kalu, 2006). There are limits to the number of items and how much a person can withdraw from his account on daily basis. Drawing from the FBN experience, essentially, the benefits of Firstcash card to holders include the following:
1.         Cash economy: The card is very convenient to use because it eliminates the need to carry large amount of cash;

2.         Access economy: The cardholder does not need to visit the bank to load the card as the card gives access to the bank account;

3.         Safety economy: Since it is PIN protected, it is safe as long as the cardholder does not compromise the PIN; and

4.         Mercantile economy: Cardholders can access cash from ATMs and POS terminals as well as merchant outlets. Furthermore, account balance requests can be done at POS terminals by the cardholder. The card is accepted not only at First Bank ATMs but also at allied counter part banks. Thus, the cardholder does not need to make a trip to affected banks to withdraw cash or check balance.

Other specific benefits to merchants relate to:

a.         Multifunctionality: POS terminals are multifunctional. In other words, various cards such as valucard, mastercard and visat, which will be accepted in near future), can be processed on a single terminal. Merchants do not have to install more than one terminal in order to handle these transactions;

b.         Liquidity: It eliminates most cash carrying problems with their associated costs and risks;

c.         Acceptability: The terminal will accept cards from Interswitch member banks which have the Interswitch logo at the back; including those of FBN, United Bank for Africa (UBA), Guaranty Trust Bank, Zenith Bank, Oceanic Bank, Wema, Afribank, PlatinumHabib Bank, etc; and

  1. Opportunity: The merchant has the opportunity to make more sales as the cardholder’s spending is not constrained by the amount of cash he is carrying at the moment. Furthermore, it is gratifying to note that FirstCash card holder has the opportunity of:


  1. Checking account balances,
  2. Withdrawing cash any time,
  3. Changing funds between linked accounts,
  4. Changing PIN where and when necessary,
  5. Obtaining mini statements,
  6. Purchasing goods/paying for services,
  7. Carrying out cash-back transactions, and
  1. Collecting cash from merchants

In all, Firstcash card can be used at any ATM located at FBN branches nationwide to withdraw cash, as well as POS terminals at selected merchant locations for purchase of goods and services. The customer service staff are equally available at branches with ATMs to assist customers. The POS debit card transaction is the next logical step to electronic payment system (EPS) in Nigeria and aligns the country with global trends. Generally, the fundamental magnetic strip contains a bundle of information such as cardholder’s PIN, Bank account number, driving license number, residential address, date of birth, etc, depending on the company.

On the other hand (but in the same vein) DBN introduced its ATM system which they chose to call Anytime Money. This is because it enables customers to cash money from their account and to carry out other basic banking activities, outside banking premises and beyond banking hours. The DBN ATM banking transactions include cash withdrawal, balance inquiry, mini statement access, checkbook request, full statement request, and funds transfer (between related accounts). The ATM service is available for subscription to individual/joint account holders who operate chequing, savings and salary accounts with the bank. The special benefits to cardholders include:
1.         Cash withdrawal possibility: Customers can withdraw cash from the ATM as many times as possible (wished) subject to a daily limit of N20,000;
2.         Balance accessibility: The ATM affords the cardholder the opportunity to have a display of account balance on the screen and also print it;

3.         Mini-statement accessibility: Customers can obtain statements of their last 10 transactions through the ATM, which can also be displayed on the screen and printed;

4.         Full=statement accessibility: Through the ATM, a three month full bank statement can be requested, which is immediately processed and delivered to the customer’s mailing address;

5.         Card safety and security possibility: The customer will be able to use his card on the ATM approximately 24 hours after it has been activated in the system;

6.         Cheque book accessibility: Customers can request for cheque book and it will be processed within 48 hours for collection at the customers’ home branch;

7.         Funds transfer possibility: Funds can be transferred from one account to another as long as they are cardholders’ accounts and are accessible by DBN ATMS. Up to four of the cardholders personal accounts can be attached to one banking card;

8.         Multiple accounts possibility: With one card, customers can access up to four of his personal accounts if so desired; and

9.         Two cards possibility: One customer can apply for and obtain an additional card for their account. This is especially beneficial where he operates a joint account or wishes his spouse or children above 18 years to independently access the account through the ATM. Each of the two cards has daily withdrawal limit of N20,000.

ATM and Risk Management Challenges
In every business, there are risks associated with operations and corporate ATM systems are no exception. Financial institutions thus experience high risks when issuing credit cards to clients. They may lose money when people default on account (not repaying all the money they have spent using the cards). Also, the banks may lose money when customers do not use this particular financial instrument enough so that the profits generated are sufficient to cover the cost of operation of the whole credit card system. Sauders and Cornett (2001) thus contended that, Credit risk arises because of the possibility that the promised cash flows on financial claims held by financial institutions (such as loans and bonds), will not be paid in full. If the principal on all financial claims held by financial institutions are paid in full on maturity and interest payments made on their promised payment dates, financial institutions would always receive back the original principal lent plus an interest return; in which case, they would face no credit risk. If a borrower defaults, however, both the principal loaned that the interest payments expected to be received are at risk.
In the Nigeria environment, technology risk may also be very high. This prevails when technological investments do not produce the anticipated cost savings in the form of economies of scale or scope. Diseconomies of scale, for example, may arise because of excess capacity, redundant technology, and/or bureaucratic inefficiencies (red tapeism) that tend to be worse as financial institutions grow in size. Diseconomies of scope particularly arise when financial institutions fail to generate perceived synergies or cost savings through major new technology investments. Technology risk could, thus, result in major losses in financial institutions’ competitive efficiency, bankruptcy, and eventual failure (Imobighe, 2006; Maidamisa, 2006; Folami, 2005; Agundu and Nyenke, 2006).

In addition to technology risk, banks also face operations risk, which generally relate to technology risks but arise mainly from existing technology malfunctions or back-office support systems break down. Nigerian banks may be easily susceptible to these risks because they are barely embracing these new technologies with dearth of skilled personnel to manage the facilities. For instance, a commercial bank’s computer system may fail to register incoming payments (funds borrowed) message on e-Naira wire transfer, but continues to process outbound (fund lent) message. Although these ATM-related risks prevail in Nigerian banks, they are not insurmountable, given the right level of commitment and accorded ideal strategic technology management.

Strategic Imperatives/Conclusion
The mergers and acquisitions going on in various segments of the Nigerian economy (especially the FSS) have been described as a revolution that would usher in better customer-focused services (Ozuru and Kalu, 2006). More importantly, the trend is expected to witness greater adoption of technologies that would drive these services, especially EPS through Smart cards deeper and wider. This according to Kapoor, Dlabay and Hughes (2004) is embedded with computer device that is capable of storing 500 times the date of a credit card and combines the data of credit cards, driver’s license, healthcare ID with medical history, insurance information, telephone cards etc. A single smartcard, can also be used to buy airlines ticket, store digitally, and track frequent-flier miles. In the near future, they will provide a crucial link between the World Wide Web (www) and the physical world.

In Ozuru and Kalu (2006), the Chief Executive Officer (CEO) of a leading expert in smartcard technologies Nigeria, reportedly highlighted what Nigerians stood to benefit from smartcard conference held in Paris (November 15-17, 2600). According to him, the conference was especially vital to Nigerians in view of the on-going reforms in the financial sector, noting that with the consolidation, the use of Smartcards becomes imperative for banks to impact positively on shareholders, and ensure that customers get first class services.

As the global trend evolves more and more, smartcards will be everywhere, including the hospital, on the roads, etc. It portends a great explosion in the world of technology. Its current level of application indicates that the trend is in deed fast changing in Nigeria. Many banks are deploying ATMs as strategic business driver, although the scope is still limited if the potential number of users in Nigeria is considered. For now, one firm (First-Global), controls about 60 percent of the financial card market in Nigeria, supplying almost all the leading banks and allied financial institutions which had achieved excellent service thresholds in the FSS, placing high premium on the safety of e-transactions (smartcards).

Economy watchers, therefore, see a future where the average Nigerian will be carrying about two or three of these cards, and it will happen much more in the FSS than it did in the telecom industry. First-Global cards, thus, designed to measure up to the best International standards (The Guardian; 2005:35).

Like the cell phone which came as one handy facility for making calls and little else, but manufacturers added cameras, e-mail, and even televisions, making the gadgets an essential part of daily routines; so cards improvement will continue. The Japanese, for in stance, have entrenched the once humble cell phone even deeper into consumer lifestyles by turning it into electronic or mobile wallet. To boost its efforts in making mobiles the new way to pay, a frontline Japanese firm took over 34% stake in a financial groups credit card business in April 2006; financing over $950 million of Japan’s second-largest credit-card issuer. The firm has since transformed phones into credit cards and sold some 3 million handsets. The latest technology lets subscribers pay for drinks at vending machines, buy groceries at convenience stores, gain entry to cinemas, and use the phones at railway turnstiles.

Since Nigeria has embraced the use of credit card in purchase, the cell phone credit card will in the near future be adopted alongside other bank credit cards as the Japanese are determined to sell the technology abroad. Therefore Nigeria as an emerging market should expect the humble cell phone (mobile wallet) to wriggle its way even deeper into prevailing lifestyles worldwide (Rowleys, 2006). The ubiquity of mobile wallets may also be witnessed soon in Nigeria as many banks today deploy ATMs as strategic business driver, and moreover potential users of cell phone in Nigeria are overwhelming. Consequently, it is imperative for regulatory authorities to instill and sustain a stable economy where FSS institutions are visibly/highly reliable, efficient and continuously capitalized, operated with the much desired credibility for all round optimality. More specifically, the ATM wind of change should translate to greater:
1.         Cash withdrawals economies, with Credit card account holders having the opportunity to withdraw cash 24 hours a day, anywhere, as long as the inter connectivity exists;

2.         Online economies, by serving as the quickest and easiest way, to transact while users are protected against credit card fraud;

3.         Cost management economies, so that as a person pays monthly bills in full, the credit card becomes cheaper than overdraft on the current account, especially if the bank charges a monthly fee as well as interest overdraft. Also, using a credit card may be cheaper than using traveller’s cheques or foreign currency to pay for purchases abroad. This is because the exchange rate used by card companies to convert foreign spending into the country’s currency is better than normal tourist rates. Credit cards are often cheaper than loans for short-term borrowing; as interest is paid on the remaining debt, not on the full amount-and there are no early redemption penalties;

4.         Income management economies, as credit cards offer flexibility to match uneven income and expenditure patterns; with users choosing what to pay off each month, between the minimum and the total outstanding;

5.         Interest management economies, as there is an automatic interest free’ period per statement period;   

6.         Account consolidation economies, as consolidated accounting system could make a cheque settle multiple transactions while they all appear neatly on the one pre-prepared statement each month;

7.         Remote purchase economies, as credit cards enable remote purchasing via the internet (by telephone or mail order);

8.         Convenience purchase economies, as credit cards make it easier to buy things. If a person does not like to carry large amount of cash or if a company does not accept cash purchases like most airlines, hotels, and car rental agencies. Putting purchases on a credit card makes buying easier and convenient;
9.         Protective purchase economies, as credit cards may also offer additional protection if what was bought gets lost, damaged, or stolen. The credit card statement (and credit card company) can vouch that the client made the purchase. In addition, some credit card companies offer insurance on large purchases;

10.       Credit line building economies, as having a good credit history is often important, not only when applying for credit cards, but also when applying for things such as loans, rental applications, or even some jobs. Having a credit card and using it wisely (making payments on time and in full each month) help to build good credit history;

11.       Emergency relief economies, as credit cards are also useful in times of emergency. While a person should avoid spending outside budgets (or available funds), sometimes emergencies (such as sudden car breakdown flood, or fire) may lead to necessary spending (like renting/leasing a car or motel room for several days/nights); and

12.       Discount/allied economies, as some credit cards offer additional benefits, such as discounts from particular stores or companies; bonuses such as free airline miles or travel discounts, and special insurance (like travel or life insurance) without regard to the above expectations, it is not worthy that ATMs are meant to encourage people to charge more money on their credit card. The credit card companies make more money from holders particularly when they cannot afford to pay off the charges. The benefits are real and helpful as long as holders endevour to spend keep within  limits. With optimality as the watchword, mutuality in fulfillment will not be elusive, and the entire economy will be better for it.

Agundu, PUC and Nyenke, C. Strategic Inter-Personal Skills in Financial Institutions Management, International Journal of Economic & Development Issues; 14-19. 5(1&2).

Folami, O. M. (2005,  November). Crimes in the Nigerian sector. International Journal of Business & Common Market Studies, :62-70. 3(2).

Imobighe, M.D. (2006, December). Private Investment and Macroeconomies Instability in the Management of Nigerian Economy (1970-2002). Journal of Research in National Development, 4(2): 113-126

Kapoor J.R, Delabary L.R, and Hughes, R. J (2004). Personal Finance. New York: McGraw Hill Higher Education

Maidamisa, A.A. (2006, June). Application of operations Research (OR), International Journal of Research in Education. 85-95. 3 (1)

Ozuru, H and Kalu, S.E (2006). An introduction to Electronic Marketing, Owerri: Ronik Divine Publishes.

Saunders, A and Cornett, M (2007). Financial Markets and Institutions, New York: McGraw Hill Higher Education.

The Guardian (2005)  Wednesday, November 9, p.35.