Automated Teller Machine: Innovation in the Banking Industry


The banking industry occupies a very strategic position in the financial system of any economy, since there will no economic growth unless there is adequate channelling of savings into investment. The banks are responsible for increasing the level of savings and investments, granting of credit and generally influencing the level of supply of money in the economy. They also facilitate economic transactions between nations thereby encouraging and promoting trade, commerce and industry.

Banks and banking is a very old profession but the modern-day banking practice as we know it today, started in the medieval days in Italian cities of Florence, Venice and Genoa. In Nigeria, banking officially had a formal legislative backing in 1952 (alford, 2010) and since then, there has been tremendous growth in the industry, which believed to have been fuelled largely by changes in technology and the banks' ability to embrace these changes successfully by implementing novel ideas in their bid to control a large share of the market. The development of self service technology and the emerging of a number of new innovations are taking place in the area of retail payments known as electronic money. (Mohamad Al-Laham, 2009). This development is influencing the banking industry due to the increased use of Automated Teller Machines. This led to a new concept in the ATM, known as the Cash/Cheque Deposit Automated Teller Machine (ATM).

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The objective of this paper is to show that the development of the Cash/Cheque deposit Automated Teller Machine (ATM) should be viewed as an innovation in the banking industry in developing countries. We also aim to find out the approach and implementation procedures adopted by the organisation in managing the innovation, examine its' benefits to the bank and finally, identifying the role played by the manager in the innovation. For the purpose of this paper, we use the introduction of Cash/ cheque deposit ATM by Skye Bank PLC., based in Nigeria as a case study.

According to (eShekels Limited, 2006), the history of ATMs dated back to the USA in the mid 1960s and gained grounds world over, in the 70s. However, in Nigeria, the ATM was introduced in 1989 by the defunct Societe Generale Bank and has since then, the ATMs appear to have spread everywhere across Nigeria. eShekels limited, further posited that the banking industry no doubt has witnessed advancement in technology just like any other sector; the use of the automated teller machine is one of these as it affects banking operations entirely. With the adoption of Self Service technology by the banks, ATMs have continued to service the populace; they offer convenience to customers and provide banking services well beyond the traditional service period. It therefore encourages a cashless society. Thus, eliminating the risk of loss of cash through theft or fire as witnessed in the past, creating a win-win scenario for parties concerned.

Industries and businesses operating in a dynamic and volatile environment always look for ways to make their growth a continuous process. They believe they can do this by finding new and creative ways of maintaining or improving their market share. The process of turning these creative ideas into facts is known as innovation.

According to the Wikipedia, Innovation is a change in the method of doing something, or the useful application of new inventions or discoveries. It may also refer to major or fundamental changes in thinking, products, processes, or organizations. (Sarkar, 2007) in citing Michael Vance simplified innovation as a creation of the new or re-arranging of the old in a new way. He went further by distinguishing innovation from invention by quoting Schumpeter (1934),

"contributors to the scholarly literature on innovation typically distinguish between invention, an idea made manifest, and innovation, ideas applied successfully in practice".

In all ramification of life, be it arts, science, economics or government policy, something new must be significantly different to be seen as an innovation. (Sarkar, 2007), further stated the difference or change must however be able to increase value, be it customer value, or producer value. The objective of innovation is positive change, to make someone or something better and ultimately leading to increased productivity which is the fundamental source of increasing wealth in an economy he concluded.

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There are different types of identified innovations. Some of them are highlighted below:

* Business Model innovation involves changing the way business is done in terms of capturing value e.g. Compaq vs. Dell, hub and spoke airlines vs. Southwest, and Hertz/Avis vs. Enterprise.

* Marketing innovation is the development of new marketing methods with improvement in product design or packaging, product promotion or pricing.

* Organizational innovation involves the creation or alteration of business structures, practices, and models, and may therefore include process, marketing and business model innovation.

* Process innovation involves the implementation of a new or significantly improved production or delivery method.

* Product innovation, involves the introduction of a new good or service that is new or substantially improved. This might include improvements in functional characteristics, technical abilities, ease of use, or any other dimension.

* Service innovation is similar to product innovation except that the innovation relates to services rather than to products.

Today's United Bank for Africa Plc. (UBA) is the product of the merger of Nigeria's third (3rd) and fifth (5th) largest banks, namely the old UBA and the erstwhile Standard Trust Bank Plc. (STB) respectively, and a subsequent acquisition of the erstwhile Continental Trust Bank Limited (CTB). The union emerged as the first successful corporate combination in the history of Nigerian banking.

UBA's history dates back to 1948 when the British and French Bank Limited ("BFB") commenced business in Nigeria and the erstwhile STB and CTB both in 1990. Following Nigeria's independence from Britain, UBA was incorporated in 1961 to take over the business of BFB. Although today's UBA emerged at a time of industry consolidation induced by regulation, the consolidated UBA was borne out of a desire to lead the domestic sector to a new era of global relevance by championing the creation of the Nigerian consumer finance market, leading a private/public sector partnership at supporting the acceleration of Nigeria's economic development, and growing the institution from a banking to a one-stop financial services institution, while spreading its footprints across Africa to earn the reputation as the face of banking in the continent.

Today, United Bank for Africa Plc. is one of Africa's leading financial institutions offering universal banking to more than 7 million customers across 750 branches in 14 African countries. With presence in New York, London and Paris and assets in excess of $19bn, UBA is your partner for banking services for Africans and African related businesses globally

Skye Bank PLC is a publicly quoted company in Nigeria with over 300,000 shareholders and is technically one of the oldest banks in Nigeria and West Africa. It provides financial products and services with a solid technological background that supports the service delivery process to customers. After the bank consolidation process in 2006, Skye bank developed into one of the top financial institutions in Nigeria. Presently, it manages more than 250 branches in the country with over 600 operational ATM machines within their business premises and other well placed location across the country.

In 2009, the Bank as part of its growth and expansion strategy and its determination to provide world class and cutting edge services to its vast majority of customers, Skye Bank Plc., introduced advancement in its electronic payment solutions, with the launch of new cash-deposit, cheque deposit and foreign exchange Automated Teller Machines (ATMs), a feat unprecedented in the history of Nigerian banking industry.

Mr Chuma Ezirim, Deputy General Manager of the bank, during the launching of the product, said "Depositing cash on the ATMs is very simple. A customer simply slots in his or her card, after which he or she is presented with options on the screen. To deposit cash all a customer has to do is select the 'cash deposit' option on the screen, after which the ATM will open the cash acceptance slot. A customer can deposit a bundle of up to 200 notes at a time, without sorting them into different denominations, as the ATM accepts 100, 200, 500 and 1,000 notes. The ATM will validate each note to confirm it is genuine, count the notes and hold in escrow. The customer is then notified of the note count and the total and given the option to continue, insert additional notes or cancel the transaction. Our customers can also deposit Cheques in ATMs. Each cheque is inserted into the ATM through the ATM Cheque Processor opening. As the cheque is inserted, it is imaged, both front and rear, the image is displayed on the screen and, subsequently, printed on the receipt to give the customer positive confirmation that the bank has accepted the cheque. When the cheque is inserted into the ATM, it is read by a MICR reader to ensure that a MICR code line is present and that it is a valid cheque. If the ATM cannot verify the cheque, it can be rejected and returned to the customer. The image of the verified cheque, together with the captured code line data, can be passed to the back-office for processing. Cheques are picked up at specified times by designated officers for further processing".

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Previously, all transactions that involve cheques and foreign currency are always done at the counter, compounded by long queues and delays.

Marc Bourreau, Marianne Verdier, Cooperation for innovation in payment system: the case of mobile payment. Feb. 2010.