The Reserve Bank's green signal for white label ATMs (those set up by non-bank entities and which can be used by customers of all banks) provides a good opportunity for growth for payment service providers such as Prizm Payments.
Currently, in addition to ATM-related services, the company also provides point of sale and card-related services and counts banks such as Axis Bank, ICICI Bank, ING Vysya, Corporation Bank, Canara Bank and SBI among its clients.
In a telephonic interview with
What are the ATM-related services that you provide for banks?
At the basic level, we provide services such as maintaining an ATM — annual maintenance contracts. At the next level are the managed services. Here, banks invest in the ATMs and decide where to put them up. We, as a service provider, look after these ATMs on a day-to-day basis, provide filling of cash, monitor them from a central location, and so on.
The third stage is providing end-to-end outsourcing services, including assistance to the banks in terms of finding ATM locations, and providing connectivity and switching services.
At the top of the pyramid is our Independent ATM Deployment or IAD model — where we determine where to put the ATMs in addition to managing the channel. This is the area we are focusing on currently.
For example, we have about 11,000 ATMs in our infrastructure. Close to 6,000 of these are deployed by us. About 5,000 is on an IAD model and those on end-end outsourcing model number about 1,000. The balance is basically where banks have bought the assets and deployed it and where we manage the services.
What is the revenue model in each of these segments?
IAD is a completely transaction fee-based model which means that only if a transaction happens at the ATM, we get paid for it. So, under this model it is equally important to determine where to put up the ATMs as location matters.
For the end-to-end outsourcing model, we get a fixed fee per month. As far as the managed services and ATM maintenance are concerned, it is also a fixed fee per month but it is a lower fee because we either don't have assets or don't provide services besides maintenance. So broadly, the maximum revenue is through an IAD model followed by outsourcing, managed services and maintenance.
Who are the players likely to set up white-label ATMs (WLAs)?
Players like us would get into this because, for us, it is like completing the whole offering. WLA is the final stage of maturity in any market. Besides ATM service providers, there could be retailers as well. The Future group or a ‘Reliance Fresh' or a ‘More' store — they could be deployers of ATMs because they have the distribution capability and infrastructure. Telecom operators may come in too. Even FMCG companies could venture as they again have large distribution structures.
Will the growth of bank branded-ATMs be affected by the introduction of WLAs?
Bank branded ATMs will still continue to grow. Branches will be opened up. So ATMs will be put there, as customers living in and around the branches need to be serviced.
But, when it comes to pure convenience for customers, banks don't hesitate to piggyback on a WLA. This helps them complete their entire service offering as, with this, customers can get money even if they go to remote locations. It facilitates penetration.
However, the WLA is only a complimenting strategy. WLAs in most of the advanced markets are not more than 15-20 per cent of the market. WLA will be opportunistic. The service providers will see where there are gaps today in terms of disparity between cards issued across banks and how many ATMs are available in a particular location.
Each WLA would be run as a profit and loss centre. Whereas when banks deploy ATMs, they go more with an approach based on where is the branch coming up, where the customers are residing, whether they have a corporate or payroll relationship with the customer. It may not be driven too much by commercial considerations.
Will the cost structure for non-bank entities be similar to that of banks when setting up WLAs?
India typically uses ATMs almost like a branch — 200 square feet space, granite or marble flooring, signages, and so on. In a bank ATM, when the customer walks in, the bank is also interested in cross-selling other products such as insurance, credit cards and loans.
For WLAs, it is not like selling a bank brand. They are a lot more less frills. We put it up in small kiosks. Moreover, you need to try and make a more viable model out of this because it is only by various banks subscribing to it that you get your revenues.
So, in that sense, generally transaction volumes on white-label ATMs will generally be lower than normal bank ATMs. World over also, it is on an average, lower. But they do have other revenue streams — advertisements are allowed on WLAs unlike bank-branded ATMs.
These will bring in additional revenues to subsidise the cost of these ATMs. These ATMs would also charge the customer similar to what he pays when he goes outside his home bank.