Global: ATM Usage Drops to 40%, Fintech Adoption Rises – KPMG Report

A recent report by KPMG reveals that the scarcity of cash in circulation has led to a significant drop in Automated Teller Machine (ATM) usage, decreasing from 70% to 40%. The report, titled “In Pursuit of Value,” gathered insights from surveyed customers of Nigerian and Ghanaian banks, reflecting their experiences throughout the year 2023.

According to the survey, the decline in ATM usage in Nigeria is attributed to the frequent unavailability of cash at many bank ATM locations. KPMG noted that medium digital transactions, which once ranked high, have slipped outside the top 10, signaling a growing reliance on Point of Sale (POS) operators.

The multinational consulting firm highlighted, “Currently, four in 10 customers report weekly ATM usage, a notable decline from the previous seven in 10 over the last few years. This decline in ATM usage coincides with a significant rise in agency banking usage, with six in 10 customers frequenting bank agents every week.”

The report emphasized the surge in agency banking, underscoring customers’ preference for readily available cash options, mainly driven by the popularity of bank agents nationwide.

Furthermore, the survey unveiled a 52% increase in digital payments between January and October 2023, based on data from the Nigeria Inter-Bank Settlement System (NIBSS). This surge in digital payments was linked to the cash crunch resulting from the Central Bank of Nigeria’s naira redesign policy in the first quarter of 2023.

KPMG stated, “Consequently, digital payments surged, marking a notable 52% increase in total NIBSS Instant Payment transactions by October 2023 compared to January of the same year. This was triggered by the Central Bank of Nigeria’s initiative to overhaul the Naira, aiming to regulate cash circulation and reduce reliance on physical currency.”

The CBN’s move to redesign the naira in October 2022 aimed to encourage cashless transactions; however, its poorly implemented policy led to a decline in economic activities, prompting a change in banking behaviors among Nigerians.

The report also highlighted that the rise in digital payments overwhelmed Tier-1 banks, resulting in multiple transaction failures. Fintechs emerged as a solution, leading to a significant shift in customer preferences. Approximately 58% of respondents switched banks or opted for fintechs during the period, showcasing a substantial increase from the 15% who made the switch in 2022. Additionally, around 13% of retail banking respondents now rely on fintech for their primary banking needs, up from the four per cent who made the switch in 2022.