ATMs Into Africa

The story in ATM Marketplace has a heart-warming tone, related to improving security.

In addition to reducing time spent on the road, ATMs alleviate concerns about safety. With ATMs installed in close proximity to workers’ jobs, they do not have to travel long distances with cash they have recently withdrawn from a bank, [commercial director of ATM Solutions] Rogan said.

Deployment of ATMs in rural areas has improved the social fabric of farm life, [managing director of Spark ATM Systems] Sternberg said. “Before deployment of ATMs near Keimoes and Kakamas, the men would often spend their money in Upington, leaving their wives and children on the farm on weekends. The men now can spend more time with their families,” he said.

Thus, more ATMs in Africa should mean less time on the road, which reduces risk of accident or robbery, and allows more time to work and be at home. That sounds great. The same might be possible if the employers made a single trip and dispensed cash on payday, but apparently they offload the risk by making their employees travel to banks to get paid.

Aside from the humanitarian aspects, as you might have guessed, there is another compelling reason for banks to expand their ATM presence: profit. Each ATM in rural Africa may see upwards of 6,000 withdrawals a month. With a US$2 fee per withdrawal (or whatever is cheaper than a drive to a bank in another area) very high margins for banks are not hard to imagine:

Cardholders in Africa and the Middle East made an average of 3,914 cash withdrawals per ATM per month in 2009 compared with 1,631 in North America, 2,797 in Western Europe and 2,789 in Asia, according to Retail Banking Research.

The remaining question is whether the bank has introduced any risks to itself by placing ATMs in the rural communities. My work with K3DES on “Protection of Sensitive Data from Device to Acquirer” for the ASC X9 Committee — ANSI (American National Standards Institute) accredited standards developing organization — should help address this issue.

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