South African banks closing ATMs because of crime and better technology

Crime and better technology are among the top reasons South Africans do not use cash, and local banks are following this trend by closing many of their ATMs.

In its 2023 Payments Study, the South African Reserve Bank (SARB) found that almost everyone uses cash as a payment method.

However, it represents only 21% of the total payment value in the study. This points to the small average value per payment. 

It further found that different income categories clearly illustrate that the more affluent members included in the survey use different payment methods for certain payments.

Despite the lower frequency and value contribution of the more affluent groups, the average value per payment is much higher. 

Furthermore, the SARB explained that automated teller machines (ATMs) remain the dominant point to access cash at 55%. 

In second place—at 28%—and a more recent addition to accessing cash is cash-back at point of sale (POS), particularly from major retailers. 

“The ability to access cash at the cash-back at POS has improved accessibility and made life easier for those who do not have ATMs in their area,” the Reserve Bank said.

“The cash-back at POS access point is an important facility for the general South African consumer, particularly in areas where ATMs are not available.”

The SARB also examined the reasons respondents gave for not using cash. 

It found that most people who use cash less than 20% of the time as a payment method indicate that the security risk is too high. 

“The balance of the reasons aligns with points already raised, such as cash-in-transit heists, particularly of those vehicles that serve ATMs; it is expensive to withdraw cash; and the inconvenience of having to travel somewhere to access cash is an added burden,” the bank said.

At the other end of the spectrum, the SARB found that those who use cash as a payment method 71% or more of the time highlight its convenience. 

These frequent users state just about the opposite of those who do not use cash frequently, listing that it is less expensive and, for some, safe to use. 

“As the most common payment method in the country, many reasons were given why cash is preferred,” the SARB said. 

The reasons given for not using cash versus the reasons given for using cash can be seen below, courtesy of the SARB’s 2023 Payments Study.

ATMs

Despite cash still being the most common payment method in the country, South Africans are starting to shift away from it.

Many of South Africa’s major banks have been closing ATMs across the country over the past five years – a trend that is set to continue as technology develops and digital banks rise in popularity.

MyBroadband recently revealed that the number of ATMs in South Africa declined from 33,171 in 2019 to 28,967 in 2023/24.

The publication explained that this is largely due to a reduced demand for cash and improved technology.

The Outlier recently reported that Absa, which used to have the most ATMs in 2019, closed almost 3,500 as its customers moved to eCommerce and digital platforms.

Most of the closures took place between 2020 and 2022. Absa said its ATM footprint remained stable over the last year.

The main reason for the small decline in the number of ATMs over the last year was sporadic violent crime.

That included bombing certain ATM sites, for which replacement units were no longer feasible.

Standard Bank has slashed its ATMs from 9,321 to 6,232 over the last five years. The decline of 3,089 machines does not mean it is not investing in its ATM network.

The bank explained that it is introducing ATMs with new technology, significantly improving transaction speed and quality of service.

“The new ATMs have higher capacity and offer more client services, including real-time acceptance, validation, and recycling of bulk cash,” it said.

“This is part of a five-year journey which will also result in either removal or relocation of low transacting ATMs to areas that are more convenient and accessible to clients.”

FNB reduced its ATM footprint from 5,780 machines in 2019 to 4,790 five years later – a decline of 990.

FNB explained that it continuously evaluated device placement, driven by local market alignment and device economics.

“Although there is a downsize in ATMs, we are installing more ADTs (automated deposit tellers) for expanded functionality for our customers,” FNB said.

Nedbank and Capitec are the only major banks that have bucked this trend.

Nedbank has seen a slight increase of 19 ATMs since 2019 despite removing 62 obsolete devices over the last two years.

It said it had observed an increase in demand for its ATM services, including by non-Nedbank customers.

“However, we also note the increasing trend in digital payments and transfers, which could potentially impact the future growth of ATM transactions,” it said.

Capitec increased its number of ATMs from 5,011 in 2019 to 8,382 in 2024.

The bank said the demand for ATM services depends on numerous factors, including economic growth and the interest rate.

However, it highlighted that digital solutions increased the options available to clients, impacting the use of cash in South Africa.

Bank Zero chairman and banking expert Michael Jordaan told Daily Investor that the trend of reducing ATMs will continue.

He explained that this is due to two factors – firstly, there is a massive shift to card purchases and secondly, cash back at point-of-sale is less expensive than ATMs. 

Jordaan believes the trend of reducing ATMs will continue, but they won’t be phased out completely.

“While they will probably not be phased out fully, they will become a last resort to transact when card swipes and mobile tap purchases/ payments cannot be made,” he said.

“Cash will go the way of cheques. Soon, nearly all banking will also be digital and mobile. And it will cost a lot less. Even zero.”