The ATM has to be connected to a host processor, which is similar to an internet service provider (ISP) in the sense that it is through the host processor that a card holder is able to access a wide range of ATMs. Host processors support leased-line machines or a dial-up alternative. Leased-line machines link to the host processor via a telephone connection – four-wire and point-to-point. In contrast, dial-up ATMs link to the host processor via a regular telephone line through a modem along with a toll-free telephone number, or alternatively using an internet service provider with a local access number, which a modem dials.
Typically, leased-line ATMs are more popular in busy locations due to their throughput capability. In contrast, dial-up ATMs are more popular in retail merchant locations due to their lower cost – a dial-up machine costs less than half the price of a leased-line ATM and their operating costs are also considerably less than that of a leased-line. In terms of ownership, banks sometimes own a given host processor. In other contexts, the merchants have ownership over the ATMs.
ATM density in Africa is the lowest in the world, making it a potentially lucrative final frontier for ATM manufacturers and technology designers. It is estimated that in 2009, there were around just 36,000 ATMs in Africa – far too low a ratio for a continent bearing 1bn people.
In addition, 80% are concentrated in four African countries – Morocco, Egypt, South Africa and Nigeria. The money culture of many Africans remains incompatible to ATM usage as a considerable proportion of African populations still prefer to stash away paper cash rather than use banks.
ATM growth in 2009, at 15%, was in double figures but not spectacular. However, there are indications that things are changing. The 2012 ATM Future Trends report predicted that Africa will be the fourth most popular target market for ATMs on the planet by 2017, after China, India and the US.
US-based Retail Banking Research, a strategic research and consulting company with extensive experience of retail banking, banking automation and payment systems, has also predicted that between 2009 and 2015, the ATM sector in Africa will mushroom by 94%. It attributes the spectacular growth to banking sector modernisation, and a better financial culture and policies.
It is also clear that Africans are in favour of improved ATM banking solutions. For example, a recent survey in Kenya found that nearly half of those polled regarded the ATM as one of the most impactful technologies in their lives – more so than cash cards or credit cards or even mobile money. Faced with the question, “Which technology, service or device has the most impact on your life?”, 49% of participants selected the ATM.
GPRS wireless technology also looks set to encourage the rapid rollout of ATMs, including in rural areas, starting in South Africa. ATM Solutions, which is the leading independent ATM provider in the country, has been using CellPAD technology to carry out new installations.
CellPAD, which Cape Town-based Datalinx Technologies has developed, is a transaction and point-of-sale processing device that relies on GPRS network for communications, as opposed to land lines. Based on the technology, the company has been able to install ATMs in some of South Africa’s most remote towns and areas, such as the south coast of KwaZulu-Natal and the former Transkei.
Most major banks in Africa have now rolled out ATMs at their branches. They are also popping up away from bricks-and-mortar banks – such as in petrol stations and shopping centres. In other words they are slowly becoming omnipresent as is the case in other regions of the world.
There is a notable shift towards advanced ATMs, which are known as ADTs. ADTs allow customers to not only make withdrawals but also carry out other transactions such as depositing money, scanning cheques, carrying out either domestic or international money transfers, and even registering for elections, purchasing transport tickets, electricity or paying parking tickets.
This makes Africa an alluring market for ATM technology designers and manufacturers as there is not just a basic rising demand for ATMs but an appetite for state-of-the-art installations. There is evidence that while countries like South Africa, Nigeria and Egypt are still seen as important target markets, ATM manufacturers are widening their focus to other countries like Kenya and Ghana.
Enthusiasm for cardless ATM services is also gathering pace on a continent where extensive use of mobile money has become normality for many Africans.
In Kenya, for example, Airtel Money recently announced that it is working with Visa to allow customers to withdraw cash at ATMs without their cards. With over 2m mobile money subscribers in Ghana, MTN Ghana has also announced its intention to offer the same service in partnership with one of the country’s leading financial institutions, Ecobank, which has around 200 ATMs in Ghana.
Using the service is simple – subscribers dial *511# on their phone, which prompts a code to be sent to their phone within a text message. The mobile user then simply enters this code at an ATM to withdraw cash.
“I urge other banks to emulate this initiative to enrich the user experience of customers,” said Eli Hini, MTN Ghana mobile money senior manager, at the time of the service’s launch.
Nigeria is joining the club. Mobile money enthusiasts in the country can now withdraw money paid to them via mobile money transfer using Quickteller ATMs. The leading integrated payments firm, Interswitch Transnational, launched the service, which enables mobile money customers to |access between N1,000 and N20,000 ($6 and $124) from a given mobile money transfer.
It is hoped that the move will
address one of the road blocks to the wide-scale adoption of mobile money by Nigerians – that is the fact that there are not enough places where Nigerians can access cash sent to them via mobile money transfer.
“We firmly believe that Nigerians everywhere, with or without a bank account, deserve to have access to contemporary payment technologies designed to simplify financial access,” said Titilola Shogaolu, chief payment and value added services officer at
Fingerprint ATMs are also attracting interest in Africa. The trendsetter has been Kenya. In 2013, Diebold and Kenya’s Tracon Services introduced a string of fingerprint ATMs in Kenya’s capital city, Nairobi.
Users have to scan their fingerprints as well as use their cash or credit cards to access money. The move seems to be at least partly prompted by the prevalence of banking fraud in the country and the responsiveness of criminals to developments in banking technology; the adoption of Europay MasterCard Visa embedded microchips and the phasing out of magnetic strip cards has made the “card trapping” technique popular with criminals.
Fingerprint ATMs create an extra barrier which makes an account impossible for a fraudster to access even if they have managed to trap a card. Fingerprint ATMs now look set to gain popularity in other African countries.
The Central Bank of Nigeria recently announced that it intends to launch biometric (fingerprint) ATMs in the country by 2015. Albuquerque-based Lumidigm, a biometrics identification company, is also currently working to develop biometric ATM technology for South Africa. Instead of entering a Personal Identification Number, customers will have to use their fingerprints to access their accounts at ATMs.
In contrast with Kenya where fingerprints are being used as a means of identification along with the PIN number, in South Africa, where biometrics is used, it will replace the PIN number. Although certain banks should be able to build the new biometric security option into existing ATMs, others may have to install new ATMs altogether, offering opportunities for a rush of orders from ATM manufacturers and biometric technology firms.
Nonetheless, it is not yet clear whether the four biggest banks in South Africa – Nedbank, First National Bank, Standard Bank and Absa – will adopt biometric ATMs. So far, Capitec Bank is the only financial institutions using the technology.
Some worry that reliance on fingerprints to gain access to accounts could prompt criminals to take desperate measures to carry out banking fraud – such as physically forcing people to withdraw money from their accounts using their fingerprints. Others have pointed out that not all people are identifiable using fingerprints – for example, in South Africa where many people engage in manual labour, some people have worn hands and thus, unclear fingerprints. Therefore, they say, biometrics cannot ever completely replace PINs.