Nigeria in the last few years has recorded technological advancements against all odds. First was the tsunami like rapid growth of the GSM technology which in the last five years has grown in leaps and bounds, making it the fastest growing sector in Africa and the third largest in the world.

The spread of these machines in the deployment of financial services is a technology that cannot be ignored since the consolidation of the Banking sub sector. As at today,over 800 ATMs have already been deployed by the banks on the InterSwitch network in the last three years, making Nigeria one of the fastest growing ATM market in Africa . The combined network may hit over 4000 ATMs by December 2007 if the current rate of operation by the banks is sustained.

According to a recent survey. The survey stated that one of the most visible outcomes of post-consolidation exercise in the banking industry is aggressive deployment of Automated Teller Machines (ATMs) by the consolidated banks.The growing trend in the deployment of ATMs show that almost all the banks are deploying cash machines as means of decongesting their shop-floors. Banks that are yet to implement their ATM network have opened letter of credits (LC) to vendors to bring in the cash machines.

However, industry watchers are already concerned by the inefficient deployment of funds by the banks in the setting up of ATM networks. According to industry sources, the banks are not utilizing the opportunities thrown up for collaboration which may lower deployment and branding cost.

Presently, most of the local banks are busy deploying off-site (non-bank branch) ATMs network in variance with global and continent trends. But the local banks are jostling over themselves, and are already leasing locations at prohibitive cost to deploy off-banking site location ATMs. In Nigeria, the Central Bank of Nigeria (CBN), after extensive consultation with the banks, has put in place a statute that empower the banks to release cash to third party organizations outside the financial industry for the operation of ATM networks to encourage a similar growth locally.

CBN's regulatory framework empowers the banks to dish out cash to non-financial institutions as part of its liquid assets. Hitherto, there were no regulations that empowered the banks to give cash to non-financial institution, hence third parties or non financial institutions had to loan cash from the banks to meet their cash need.

Worse hit by the system, ATM Consortium (ATMC), Nigeria 's pioneer and leading off-site independent ATM deployer (IAD) and operator of the QuickCash network, had appealed to the Central Bank of Nigeria (CBN) to put in place a national currency management system to ensure that non-bank operators of the facility can access ATM-fit notes in sufficient quantities to support its services.

Perhaps, CBN needs to enforce the regulation by forbidding the banks from setting up off-site banking locations. This will go a long way in attracting private equity into the business and therefore bringing in more professionalism into it.

However, it is pertinent to note that some local banks are already exploiting the outsourcing or subsidiary model, by outsourcing the deployment and management of their ATM networks to ATMC.

According to a banker in one of the consolidated banks, who pleaded anonymity, said the outsourcing option is strategic in ATM business. "There is no alternative to the outsourcing model because for the banks running the ATM network is typically not our core business. We therefore don't focus on the necessary expertise and technical ability to do it. In fact, the alternative to this model is chaos. But I hope the banks realize this early enough", he said

Ironically, banks in smaller African countries are embracing and acknowledging the inherent advantage of scale in this outsourcing model.

Meanwhile, the global trend strongly emerging is that several banks in Europe and the US are building multilateral shared ATM platforms for the operation and management of ATMs in off-banking locations.

In the West, white-label or no name ATMs or better still non-bank branded shared ATMs are deployed by third-parties who make their machines available to bank customers and make money on each transaction. A model where multiple banks could outsource deployment of ATMs to private companies is gaining ground globally.

This outsourcing model option thus frees the banks from the day to day running of the ATM networks, and enables them to focus on their core competencies of financial services. With this model, there could even be private equity players who could look at foraying into this space. The largest ATM network in the United State and Europe are owned by private equity players such as Banktronics, Bank Machines. Even in South Africa , the largest ATM network is not owned by banks but a private equity player called ATM Solutions.

In Tanzania , East Africa , six local banks have teamed up to establish one Automated Teller Machine (ATM) deployer to be known as "Umoja Switch".

To be launched later this year, Umoja Switch would enable customers with accounts in any of the banks to procure services from the banks' shared devices.

The six banks in the Umoja Switch are Akiba Commercial Bank (ACB), Azania Bancorp, Dar es Salaam Community Bank (DCB), Tanzania Investment bank (TIB), Euroafrican bank and Twiga Bancorp.

In Kenya , another East African country, more banks have joined PesaPoint ATM network. In August, National Bank of Kenya becomes the 7th financial institution to be activated on the ATM network since it started operations in November 2005.

Other banks on the PesaPoint ATM network which specializes in deployment of cash machines at off-banking site locations include Fina Bank, Diamond Trust Bank, NIC Bank, Imperial Bank Limited, Prime Bank and Guardian Bank.

Speaking at the launch of the partnership in Nairobi , Mr. Reuben Marambii, Managing Director of National Bank of Kenya said, "National Bank is proud to be the first large bank in Kenya to recognize the value that PesaPoint can bring its customers in keeping with our commitment to meeting their growing needs. Through this initiative we are providing our customers access to one of the largest and most affordable networks offered by any bank.

"Offering services through third parties is increasingly being recognized where these are provided by resourceful and focused partners. PesaPoint's strong branding and innovative positioning will make it easy for our customers to get access to their cash wherever they are", he pointed out.

Even in India Automated Teller Machine (ATM) service providers are in talks with banks to set up a joint venture subsidiary to roll out white-label ATMs. The talks are taking place in anticipation of guidelines on white-labelled ATMs to be issued by the RBI.

Thus, the route of a subsidiary company is being explored by both players. ATM providers are trying to work out a deal where, for the purpose of banking regulation, the cash would be a part of the banks treasury but the infrastructure would be brought in by the service provider.

The players are looking at setting up a model where multiple banks could outsource the deployment of ATMs to private company. Among domestic players, there are three private sector banks who are actively examining this option as of now. Development Credit Bank is one of the banks tipped to have received a similar proposal from one of the service providers.

Players such as FSS, e-funds, Reliance Capital and few foreign parties such as Euronet are believed to have evinced interest in the ATM business. Australia-based Banktech group recently set up shop in India where it plans to offer services in the ATM deployment and transaction processing market by setting up white-labelled ATMs.

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