South Africa’s leading banks are rethinking their reliance on Automated Teller Machines (ATMs), marking a significant shift toward a digitally-driven financial ecosystem. Once heralded as a pillar of financial inclusion, ATMs are being retired at an increasing rate as banks prioritize compliance automation, cost efficiency, and the rapid rise of digital payment channels.

Traditionally, ATMs have played a vital role in bridging the gap between banks and underserved communities across Africa. Countries like Nigeria, Egypt, and South Africa collectively operate tens of thousands of ATMs—Nigeria with approximately 21,000, Egypt with over 23,000, and South Africa with nearly 18,672 as of 2021. However, the tide is turning in South Africa, where top banks—Standard Bank, Absa, Nedbank, and First National Bank (FNB)—collectively closed 233 ATMs in just the first half of 2024.

Only Capitec Bank is bucking this trend, actively expanding its ATM footprint to meet the diverse needs of South Africans who still rely on cash for everyday transactions. According to Capitec’s Head of Brand and Communications, Asha Patel, “While digital adoption continues to grow, cash remains essential for many South Africans’ daily transactions.” Capitec’s dual strategy combines cash accessibility with digital onboarding, ensuring no customer is left behind in the evolving financial landscape.

Why the Decline?

The accelerating shift toward digital payments is central to this transition. FNB’s CEO of Points of Presence, Zibu Nqala, notes a clear behavioral change among income brackets. “Three years ago, 31% of payments among mid- to low-income earners were in cash. Today, it’s down to 25%,” he said, underlining a broader regulatory shift toward cashless economies.

Similarly, Absa’s leadership acknowledged that the country’s largest ATM fleet in 2022 no longer aligned with changing customer needs or operational efficiency. Meanwhile, regulatory costs, such as interest fees levied by the South African Reserve Bank (SARB) on ATM-stored cash, are incentivizing banks to digitize. Fewer ATMs mean reduced compliance overheads and lower operational costs.

The trend isn’t unique to South Africa. Kenyan banks also shut down 77 ATMs between January and December 2023, citing similar motivations—rising digital adoption and the financial burden of maintaining legacy infrastructure.

The Inclusion Gap

Despite the surge in digital transformation, a large portion of South Africa’s population remains dependent on cash. With 56% of transactions still conducted in cash and 94% of South Africans withdrawing cash monthly, the rapid retreat from ATM infrastructure raises concerns about financial exclusion, especially for the informal economy.

Informal traders and rural communities often lack access to digital tools and Point of Sale (POS) systems. “More than anything, you won’t find them with a mobile POS. It’s either cash or nothing,” said Thato Malelu, an expert in the informal economy.

Banks are responding with innovative compliance-driven solutions to bridge this gap. Services such as FNB’s eWallet, Absa’s CashSend, and Standard Bank’s Instant Money allow users to send money to phone numbers, which recipients can withdraw at partnered retail outlets like Shoprite and Pick n Pay—even without a bank account or card.

Additionally, the introduction of Payshap—a real-time digital payment gateway by the Payments Association of South Africa (PASA) and BankservAfrica—streamlines transactions through mobile numbers. Despite its potential to boost regulatory reporting, fraud detection, and financial compliance, uptake remains limited due to low public awareness.

The Path Forward

With nearly 20% of South Africa’s workforce engaged in the informal sector, a complete pivot to digital is still aspirational. The current hybrid model—where compliance analytics, cash digitization, and retail access points coexist—serves as a critical RegTech solution in transitioning the population gradually and equitably.

As South African banks trim their ATM networks in favor of compliance-optimized digital infrastructure, the nation is signaling its readiness to embrace a future where regulatory compliance, payment innovation, and financial inclusion converge.