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Why CBN reintroduces charge on ATM withdrawals

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IMAGE: Dipo Fatokun, director, banking and payments system department, »


After addressing participants that gathered at the Nigeria electronic Fraud Forum (NeFF) in Lagos, a group of journalists cornered Dipo Fatokun, director, banking and payments system department, Central Bank of Nigeria (CBN), to find out why the apex bank reintroduced the fee banks charge on Automated Teller Machine (ATM) withdrawals and the implication of such action on financial inclusion.

His explanations show that a lot of people take advantage of no fee charge on ATM withdrawals to make unnecessary withdrawals at will, thereby incurring huge cost on the acquirer banks. He, however, admitted that the introduction of new fee on ATM withdrawals remote-on-us will not have any negative impact on the financial inclusion drive of the CBN.

“It is not a re-introduction per say. You have to agree with me that when the amendments were made in December 2012, it used to be N100 on any remote-on-us withdrawal. A remote-on-us, as you know, is when as a cardholder, you go to any other bank that is not your bank to withdraw cash. It was removed then so that people can go to other ATMs.

“But the truth is that, as we said in the circular, that N100 included, N35 goes to the payment bank, which has now been completely waived. But in going to other ATMs to make withdrawals, your bank, that is the acquirer bank, incurs cost of N65 which they pay to the switches and the owner of the ATM that you are using.

“Between 2012, and recently when the review was done, it was discovered that people have actually turned ATMs into their personal purses because nothing is charged. Somebody needs N500, N1,000, he will go to an ATM to withdraw, such that in a day, some people can patronise ATMs up to five times, and this has created a huge cost burden for the banks that issued the cards.

“So, that is why we said even though remote-on-us will still be encouraged, you can go to other banks’ ATMs and withdraw up to three times, there will be no charges, but it is when you make the fourth withdrawal that you pay the N65 that the bank ought to have paid on you behalf. Of course, if you go to the ATM of your bank, you are free to withdraw as much as you like. So, it does not discourage financial inclusion.”

The CBN last week in a circular signed by Fatokun reintroduced the fee that banks charge on ATM withdrawals. The circular stated that effective September 1, bank customers are to pay N65 per ATM withdrawal, however, after three transactions from an ATM not belonging to an issuer bank.

In the new directive, the CBN said the reintroduction of “remote-on-us” cash withdrawal transactions fee, “which will now be N65 per transaction is to cover the remuneration of the switches, ATM monitoring and fit-notes processing by acquiring banks.”

The new charge, it noted, “shall apply as from the fourth “remote-on-us” withdrawal (in a month) by a card holder, thereby making the first three transactions free for the card holder, but to be paid for by the issuing bank.

“All ATM cash withdrawals on the ATM issuing banks shall be at no cost to the card holder.”

It would be recalled that the CBN, in collaboration with the Bankers’ Committee had in December 2012 abolished the N100 fee on “remote-on-us” ATM cash withdrawal transactions, transferring such costs to issuing banks. 

This fee is shared between the acquirers, issuers, and arms switches.

On commencement of the arrangement, in 2012, banks, according to the CBN, decided to wave the issuer fee (N35), which should have ordinarily been an income to them.

Consequently, banks only bore the cost of N65 each time their customers use another bank’s ATM.

Article Credit: Businessdayonline

Updated 4 Years ago

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