The scarcity of cash in circulation in Nigeria has led to a significant drop in the weekly usage of Automated Teller Machines (ATMs) from 70% to 40%, according to a report by KPMG, a multinational consulting firm. The report, titled “In Pursuit Value,” gathered insights from surveyed customers of Nigerian and Ghanaian banks, detailing their experiences throughout the year 2023.
The findings revealed that the frequent unavailability of cash in many bank ATMs contributed to the notable decline in ATM usage in Nigeria. KPMG noted that medium digital transactions, which were once in the top tier, have fallen outside the top 10, underscoring a dependence on cash transactions through Point of Sale (POS) operators.
The report highlighted that the current scenario sees four out of 10 customers reporting weekly ATM usage, a marked decrease from the previous seven out of 10 over the past few years. Simultaneously, there has been a significant increase in agency banking usage, with six out of 10 customers visiting bank agents every week.
KPMG emphasized the continued popularity of cash, driven by customers’ preference for readily available cash options, particularly through bank agents across the country.
The survey also disclosed 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 attributed to the cash crunch resulting from the Central Bank of Nigeria’s (CBN) naira redesign policy implemented in the first quarter of 2023.
The CBN’s initiative aimed to overhaul the naira, regulating cash circulation and reducing reliance on physical currency. However, the poorly implemented policy led to a decline in economic activities, causing challenges for Nigerians.
The rise in digital payments overwhelmed Tier-1 banks, resulting in multiple cases of transaction failures. Fintech companies stepped up to the challenge, leading to a significant shift in customer preferences. The survey reported that 58% of respondents switched banks or opted for fintech solutions during the period, a substantial increase from the 15% who switched banks in 2022.
Additionally, around 13% of retail banking respondents now rely on fintech for their primary banking needs, compared to four percent in 2022, highlighting a radical shift in consumer behavior and preferences.
