The Central Bank of Nigeria (CBN) announced a revision of Automated Teller Machine (ATM) transaction fees, effective March 1, 2025. This review, outlined in a circular dated February 10, 2025 and referenced as FPR/DIR/GEN/CIR/001/002, aims to address the rising operational costs associated with ATM services, improve the efficiency of ATM services within the Nigerian banking industry and encourage wider deployment of ATMs across the country. The Central Bank of Nigeria (CBN) also issued a set of frequently asked questions (FAQs) related to the recent review of ATM transaction fees.
This analysis breaks down the key points of the circular, implications and recommendations for the relevant stakeholders, including financial institutions, consumers, and ATM deployers/acquirers.
Overview
The CBN’s review introduces a tiered fee structure for ATM withdrawals, moving away from the previous three free monthly withdrawals for “Remote-On-Us” customers (those using ATMs of other banks). The new fee structure is as follows:
On-Us Transactions (Withdrawals from your bank’s ATM): No charge. This remains free for customers.
Not-On-Us Transactions (Withdrawals from another bank’s ATM):
- On-site ATMs (located at bank branches): N100 per N20,000 withdrawal.
- Off-site ATMs (located elsewhere, e.g., malls, gas stations): N100 per N20,000 withdrawal, plus a surcharge of up to N500 per N20,000 withdrawal. This surcharge will be displayed at the ATM before the transaction.
- The surcharge is the income of the ATM deployer/acquirer and must be disclosed at the point of withdrawal.
International Withdrawals: Cost recovery fee, meaning the exact charge levied by the international acquirer will be passed on to the customer.
Free Monthly Withdrawals: The previously allowed three free monthly withdrawals for Remote-On-Us consumers (other bank’s customers) are no longer applicable.
The circular clarifies that the N100 fee applies to every N20,000 withdrawn. This means that even if a customer withdraws less than N20,000, the N100 fee still applies. A tiered fee structure is also in place for withdrawals exceeding N20,000, with an additional N100 charged for each subsequent N20,000 or part thereof. Importantly, banks are expected to allow customers to withdraw up to N20,000 per transaction, and any bank compelling customers to withdraw smaller amounts will be sanctioned.
The terms “Not-On-Us” and “Remote-On-Us” are confirmed to be interchangeable, both referring to transactions at ATMs not belonging to the cardholder’s bank.
IMPLICATIONS FOR STAKEHOLDERS
Customers: Customers will now incur fees for using ATMs of banks other than their own. This will likely incentivize customers to use their own bank’s ATMs or explore alternative payment methods like mobile apps and POS terminals to avoid these charges. The removal of the three free monthly withdrawals will particularly impact those who frequently use other banks’ ATMs. However, the clarification on the N20,000 withdrawal limit protects customers from being forced into multiple smaller, fee-inducing transactions.
Others include:
Increased Costs: Consumers will face higher fees for Not-On-Us transactions, especially at off-site ATMs, which could lead to increased banking costs.
Informed Decisions: The disclosure requirement empowers consumers to make informed decisions about their ATM usage.
Banks: Banks are expected to benefit from increased revenue through transaction fees, which can help offset the costs of ATM deployment and maintenance. This may lead to increased investment in ATM infrastructure and potentially better service. They also have the flexibility to charge a lower surcharge than the capped N500. Banks will need to ensure their systems are updated to reflect the new fee structure and clearly display surcharge amounts to customers.
ATM Deployers/Acquirers: ATM deployers/acquirers will receive the surcharge for off-site ATM transactions, providing an incentive for deploying ATMs in more locations.
CBN: CBN’s goal is to improve the efficiency of ATM services and encourage wider deployment. The fee review is a mechanism to achieve this by addressing the cost concerns of banks and ATM deployers. The CBN will also be responsible for monitoring compliance and addressing customer complaints regarding overcharging or forced smaller withdrawals.
Takeaways
– The new fee structure aims to balance the costs of ATM operation with customer usage.
– Customers should be aware of the new fees and consider using their own bank’s ATMs or alternative payment methods to minimize costs.
– Banks are expected to be transparent about fee structures and ensure their ATMs function reliably.
– The CBN is committed to improving the efficiency and accessibility of ATM services.
Challenges that Might Arise with these Fee Changes
Implementing the revised ATM transaction fees may present several challenges for various stakeholders. Here are some potential challenges:
Challenges for Financial Institutions: Increased fees might lead to customer dissatisfaction and complaints, potentially harming the institution’s reputation. Ensuring all customers are well-informed about the changes requires extensive and effective communication strategies. Financial institutions must update their systems and processes to comply with the new fee structure, which can be time-consuming and costly.
Challenges for Consumers: Consumers will bear the brunt of higher fees for Not-On-Us transactions, especially at off-site ATMs, which can strain their finances. Customers might be confused about the new fee structure, leading to misunderstandings and potential dissatisfaction. Consumers would need to change their ATM usage habits, which could be inconvenient and require time to adapt.
Challenges for ATM Deployers/Acquirers: Deployers and acquirers may need to invest in additional ATMs to capture more transactions, which requires capital and resources. Ensuring that surcharges are displayed accurately and transparently at the point of withdrawal requires system updates and monitoring.
General Challenges: Financial institutions might face increased competition as customers seek alternatives with lower fees, potentially affecting customer retention. Also, adhering to the new regulations and ensuring compliance with the capped charges and surcharges can be complex and resource-intensive.
Additional Role to Be Played by CBN and Financial Institutions
Effective communication of ATM transaction fee changes is crucial to maintaining customer trust and satisfaction. By following certain best practices, financial institutions and CBN can ensure that customers are well-informed, understand the reasons behind the changes, and can make informed decisions about their banking activities. These best practices include:
1. Clear and Transparent Communication
Communicating the changes through various channels such as email, SMS, in-app notifications, website announcements, and physical notices in bank branches. Using clear and straightforward language that all customers can easily understand. Avoid jargon or technical terms that might confuse customers and provide detailed information about the new fees, including the specific amounts, conditions, and any applicable surcharges.
2. Advance Notice
Inform customers well in advance of the effective date of the new fees. This allows customers to adjust their banking habits accordingly and clearly state the date from which the new fees will take effect, to avoid any confusion or misunderstanding.
3. Educational Campaigns
Create and distribute FAQ documents and user guides that explain the changes in detail. Address common questions and concerns that customers might have. Host online webinars or in-branch workshops to explain the fee changes and provide an opportunity for customers to ask questions and seek clarifications.
4. Personalized Communication
Personalize communications based on customer segments. For example, high-frequency ATM users might receive more detailed information about fee changes compared to infrequent users and ensure that customer service representatives are well-trained and knowledgeable about the new fees to assist customers effectively.
5. Transparency and Disclosure
Display the fees and any surcharges clearly on ATM screens before the transaction is completed. This ensures customers are aware of the charges before proceeding and ensure that all communication materials—whether digital or physical—are consistent in message and information.
6. Encouraging Alternative Channels
Encourage customers to use alternative channels such as mobile banking apps, online banking, and POS devices to minimize ATM transaction costs and offer incentives or discounts for using alternative channels to promote their adoption.
7. Monitoring and Feedback
Actively seek customer feedback on the new fee structure and its communication. Use surveys, feedback forms, and social media channels to gather insights. Continuously monitor the effectiveness of communication strategies and make necessary adjustments based on customer feedback.
CONCLUSION
The CBN’s review of ATM transaction fees mark a significant shift in how these services are accessed and utilized. While customers may face new charges, the move aims to ensure the long-term sustainability and improvement of ATM services across Nigeria. As the new fee structure comes into effect, stakeholders must adapt to these changes to optimize their operations and decision-making. By understanding these provisions and their implications, stakeholders can better navigate the evolving landscape of ATM services in Nigeria effectively.
