Ever thought of booking an air ticket using the ATM or paying your insurance premium through the neighbourhood cash dispenser? Or how about using the ATM to advertise your new business? All this and much more will be possible with ATMs being rolled out by non-banking companies, called the white-label ATMs.
The operators of these ATMs, or Automated Teller Machines, will have tie-ups with multiple banks and, apart from regular features, will also offer value-added services such as remittances, air, train and bus ticketing, and third party advertisements. This means that these players, which include Tata Communications Payment Services (TCPSL), Muthoot Finance and SREI, will act as financial services kiosks and make money from services beyond mere cash withdrawal. And that’s the way RBI has envisioned them — one-stop shops for major financial transactions.
ALMOST A NECESSITY
But will they be financially viable? “Yes,” believes Sanjeev Patel, CEO of Tata Communications Payment Solutions (TCPSL). The market is under-penetrated, the Reserve Bank of India is insisting on financial inclusion and banks don’t have the time and resources to set up pan-India ATMs. And that’s where white-label ATMs step in.
India has just 100 ATMs per million population, much lower than the US, which has over 1,200 ATMs per million. “We are still heavily under-penetrated. You have to walk a substantial distance to reach an ATM, especially in tier III to tier VI areas. That makes it a huge opportunity for us,” he said.
Patel’s optimism stems from the response that TCPSL’s ATMs have got so far. “While the average transactions per day for an ATM are 140, our Indicash ATMs in Bangalore are doing 200 transactions,” he points out. TCPSL has already set up 100 ATMs so far and plans to take the number to 15,000 over the next three years. It has found a ‘sponsor bank’ in Federal Bank, more like an anchor tenant for TCPSL’s white-label ATMs.
While the cost of setting up an ATM is between Rs 5 lakh and Rs 6 lakh, the monthly operating expenses ranges from Rs 10,000 to Rs 50,000 depending on factors such as location, electricity charges and rentals. On an average, about 5,000-6,000 transactions a month can help an ATM breakeven in two years.
White-label ATMs will not have the branding of any bank and customers will be charged Rs 15 per cash withdrawal transaction, while Rs 5 will be the fee for balance enquiry. “With the RBI allowing value-added services at white-label ATMs, we will be able to take better care of cost of running them as we don’t have our own customers,” says Patel.
Currently, banking services are heavily skewed in favour of urban areas. Nearly 75 per cent of the 1,20,000 ATMs in India cater to just 45 per cent of the banking customers, largely in tier 1 and tier II cities.
BANKS TO BENEFIT
White-label ATMs will be a blessing for banks as well, which are grappling with dwindling deposits and declining demand for loans. “For banks, there are multiple benefits. White-label ATMs can give us visibility, increase our reach and will be a tool for customer acquisition as well as servicing,” said Pralay Mondal, Group President, Retail and Business Banking at YES Bank.
Shalini Mehta, Executive Vice-President, Kotak Mahindra Bank, agreed: “We will be able to save costs, which are currently being incurred on network expansion and maintenance. It will also help us increase the reach of ATMs to tier III towns and rural locations.”
Though the cost benefits are immense, banks are wary of the lending risks in partnering with them. “We need to assess how the operator can handle the due diligence and reconciliation in case of issues faced by customers as we are answerable to the regulator,” said Rajeeb Chatterjee, Head – ATM and Mobile Banking at HDFC Bank.
While it is too early to gauge how white-label ATMs will impact operators and banks, the clear winner is going to be the customer, who will have wider and easier access to a host of financial services under one roof.