By Demessie Girma (PhD)
Addis Abeba – It’s a paradox that often leaves me both surprised and dismayed: the tendency of Ethiopian banks to charge customers for services facilitated by technology, such as ATM machines and online banking. These services, leveraging technological advancements, effectively offset significant human resource (HR) costs. Moreover, they are pivotal in driving the future of banking towards a landscape that eschews traditional brick-and-mortar branches in favor of digital platforms.
In envisioning the trajectory of digital transformation and the pervasive nature of digital banking, one must question whether banks should not instead streamline their operations by empowering customers through education and awareness about automated digital banking, rather than focusing solely on short-term profit.
Services that allow customers to conduct banking without visiting a physical branch should be provided free of charge. The rationale behind this is clear: the benefits derived from technology far outweigh the HR costs for banks. The convenience and time saved by customers should rightfully be considered part of the technology’s benefits, and thus, customers should not be burdened with additional charges. This business model is tacitly acknowledged in many European countries and North America, where withdrawing cash from one’s own bank’s ATM often incurs no fees.
There are instances where small fees are incurred when withdrawing cash from other banks, but even this cost can be avoided through bank partnerships. For example, banks A and B can collaborate to enable their customers to withdraw cash from either bank’s ATM machine without incurring any fees. In some cases, there are also third-party niche market ATM machines, such as those found on expressways or remote locations, which offer customers a choice with clearly displayed fees. While such costs can be understandable, they are becoming increasingly rare as cashless transactions become more prevalent.
Banks must prioritize their long-term positioning. Instead of focusing solely on short-term profits from automated services—which, by their nature, should be free—they should reallocate the benefits of technology to their customers. By eliminating fees, banks can encourage widespread adoption of ATM and digital banking, paving the way for a fully automated future.
The trajectory in developed countries like the UK is indicative of this shift. Online banking is rapidly gaining ground, with high street retail bank branches projected to disappear by 2027. As a backdrop to this projection, in 2022, approximately 93% of the British population engaged in online banking, with 25% transitioning to digital-only bank accounts by 2023—a significant increase from 9% in 2019. As of the beginning of 2024, there were just over 8,000 branches left in the UK, a notable decrease from the 22,000 branches recorded in 1986 when records began. This trend is likely to reverberate in other developed nations.
This evolving landscape offers a crucial lesson for developing countries: rather than investing in costly physical infrastructure, they should consider the more economical and future-proof option of transitioning to online platforms—a move that often becomes imperative with the onset of technological shifts. Concurrently, empowering customers to embrace IT-based digital banking, perhaps through subsidies for personal smart devices, becomes paramount in navigating this transition.
It’s evident that strategic alignment between government policies and forward-thinking business strategies will play a pivotal role in charting this course.
In the context of this article, the banking sector must align itself with the future of a fully digital banking system. Achieving this critically hinges on empowering customers today, articulating the clear benefits of technology, and refraining from burdening them with unnecessary fees that should be free from the outset. AS
Editor’s Note: Dr Demessie Girma, PhD, CEng, MIET, SMIEEE, is a technologist specializing in digital transformations. Dr Girma extensively writes about emerging technologies, particularly Mobile Cloud Computing and AI, with a special emphasis on their implications for the developing world.
