Say goodbye to ATMs in South Africa as you know them

The Reserve Bank is planning a significant overhaul of South Africa’s cash system, which includes a plan to roll out white-label ATMs to make it easier to deposit and withdraw physical banknotes. 

Coupled with plans to create a cash-management company and tighten oversight of how money circulates, the Reserve Bank plans to make it easier and cheaper to access cash. 

This is despite the overall amount of cash in South Africa’s economy remaining relatively flat at R180 billion. Cash still accounts for two-thirds of all transaction volumes in the local economy. 

While cash remains dominant, it is becoming increasingly expensive and challenging for businesses and commercial banks to manage. 

The cost of managing, transporting, and securing physical money in South Africa amounts to around R90 billion a year, with most of the burden being shouldered by consumers. 

As part of its plans to reduce this cost for consumers, the Reserve Bank plans to create a company to manage all of the ATMs in South Africa. 

The bank’s Payment Ecosystem Modernisation Programme is expected to reduce cash usage by around 30% to 40% in the coming years. 

Payments Ecosystem Modernisation Programme executive director Pradeep Maharaj explained the role white-label ATMs are expected to play in this programme. 

Currently, South Africans pay elevated ‘disloyalty’ fees when using ATMs outside of those owned by their respective bank. 

Maharaj told 702 that the Reserve Bank is going to create a cash-management utility to make it more affordable for consumers to access. 

In particular, this utility will aim to ensure that poorer South Africans, and those in rural areas, will not be left behind by the increasing digitisation of the economy. 

In some cases, it is not profitable for commercial banks to operate ATMs or branches in areas with small populations, particularly if multiple banks are already operating in the area.

The so-called Cash Smart Strategy aims to ensure that physical funds remain accessible for low-income and rural communities that have limited digital payment options and face costs that are up to five times higher than those of urban users.

White-label ATMs

A key aspect of the Reserve Bank’s strategy is to transform bank-owned ATMs into white-label machines, allowing customers from any bank to withdraw money at minimal or no cost.

“As far as ATMs are concerned, we are looking to roll out white-label ATMs, which means that all the infrastructure in the country will be taken over by the utility,” Maharaj said. 

“This means that all ATMs will offer their services at the same price, in contrast to how it is currently, with only your bank offering you a better price.” 

Maharaj did not give an exact number for the price of withdrawing or depositing cash at these white-label ATMs, but said it would be close to zero for the end user. 

“We are proposing that all of the ATMs in the country go into a utility, so a cash-management utility will be set up, and all the ATM infrastructure will be brought into it,” Maharaj said. 

Alongside ATM infrastructure, all the cash centres in South Africa will be brought under the management of this utility. 

“All of this, we believe, should go into a utility and be shared infrastructure. This means we can rationalise infrastructure, spread the infrastructure to areas where cash is still in demand and thus minimise the movement of cash,” Maharaj said. 

This will ultimately result in the cost of managing, transporting, and securing cash coming down over time, enabling the Reserve Bank to offer services more cheaply. 

Maharaj made it clear that the plan will include this utility taking over property and infrastructure from private players, including banks and security companies that transfer cash. 

“We believe that we make a compelling argument for banks to bring their infrastructure into our utility. We will consider allowing private ATMs, but for any customer using that, it will be the same cost as using a white-label ATM,” he said. 

This means that there will be very little incentive for commercial banks to operate their own ATM infrastructure, as they will be unable to charge elevated fees to recoup their costs. 

Maharaj said South African banks will not be surprised by this move, as the largest players have engaged in similar practices with each other. 

He explained that in the past, banks have come together to develop shared infrastructure to manage cash more efficiently and securely. 

Thus, in this sense, the Reserve Bank’s plan to move shared infrastructure under one umbrella is a continuation of this practice.