Just like prepaid mobile phone services changed the way people talk, automated teller machines (ATMs) changed the way people transact. However, India still lags behind in reach and technology in this space compared with other emerging as well as the developed countries. Navroze Dastur, managing director (financial services), NCR Corp. India Pvt. Ltd, a company which manufactures and manages ATMs in India, talks about the developments made so far in the space and what’s in the pipeline. The company has been in India for 17 years and has around 45% market share of the ATM business here, according to Dastur.
How have ATMs caught on in the Indian market?
It has been a cash-and-dash market largely, which means people go to ATMs mostly to withdraw cash though an ATM machine can be used for various other functions. For instance, we recently rolled out a system where a customer can walk up to an ATM machine and deposit cash and immediately get credit. It is different from envelope deposit which most ATMs have. This is very useful for retailers who collect cash throughout the day as Indian economy is mostly cash-driven.
Then, you can use ATMs to print or update your passbook. Apart from that, you can also make utility bill payments. Though the technology has been there, banks do not encourage such transactions mainly to curtail long queues.
Is this also because of shortage of ATM machines in India?
Yes. If you look at India today, we have about 74 ATMs per million of the population. In comparison, China has over 200 machines per million and the US has 1,300 ATMs per million. So ATM penetration is very low but then even bank penetration is low in India; 50% of the population is unbanked. This is in sharp contrast with other emerging economies.
But by 2017, we are expecting ATM population in India to be 400,000 compared with around 140,000 at present. This will be largely driven by banks going to rural areas and government initiatives such as direct benefit transfer. Today, we are seeing a 25% year-on-year growth in ATM penetration and this will increase, but we have a long way to go.
As of now, you find ATMs in clusters at one location, mostly in metros and urban areas. These need to be spread out across rural and semi-rural geography.
The white label ATMs (WLAs), for which the Reserve Bank of India has issued licences, will also help in penetration. These will be private label ATMs and will not be any bank’s brand. For instance, Tata Communications has launched Indicash and it is using our ATMs.
How will these WLAs charge?
The first five transactions are free anyway. Beyond that banks will take a call on charging customers. WLAs will be paid by the banks whose cards are used at these ATMs.
Will this help banks to minimize ATM cost?
Yes. In fact, the ministry of finance took an initiative wherein it divided the country into 16 clusters and said that all public sector banks will buy under a common platform and these clusters were auctioned to service providers. These service providers were asked to deploy ATMs on an outsourced model for public sector banks. The branding will be that of the bank, cash will be provided by the bank, but it (the unit) will be managed by service providers.
What do you mean by managed here?
I mean end-to-end management. So anything such as cash availability or jam in the currency dispenser, everything is monitored and diagnosed remotely and then a team is sent to fix the problem.
We also do cash management. We have tools, which help us identify what amount of cash is required to be put in each ATM based on data that we collect from ATMs. It is not efficient to have a large network of ATMs stacked with cash without transactions. The data helps banks take a conscious decision on how much cash to put in a particular ATM so that it neither reaches a cash-out situation, nor does it remain stacked with idle cash. We also coordinate with cash-in-transit agencies, which put cash in the ATMs whenever required.
How far are we from Aadhar- or biometrics-enabled ATMs?
The 16 clusters that I mentioned, where new ATMs are being deployed, are all biometrics-enabled. The government came out with the requirement of 63,000 such ATMs to be deployed in these clusters in the next two years. These will have two levels of authentication. The machines that have already been deployed need to be updated.
You said that with bank penetration happening in rural geographies, more ATMs will be required. But in these areas, there are business correspondents (BCs), a system that involves much less cost. Do you see BCs as a threat to your business?
We see BCs complementing our business rather than a challenge. We need penetration and this can only happen through BCs. In the districts where BCs have gone, they have generated banking transactions. They open accounts and then cards come into play. In a way they are a catalyst for us.
What challenges do you face in India?
The biggest challenge that we face while deploying ATMs in India is the availability of power. So we use solar power in certain pockets. Another challenge is environmental conditions. We have machines which work in even 45 degrees Celsius temperature.
The other aspect is security. As ATM penetration increases, there will be chances of frauds and crimes. Even now we see some rudimentary crime happening such as thieves picking up machines; so we now bolt machines to the ground. We have also seen some sophisticated crime happening such as card skimming, wherein your card data gets compromised. From the technology perspective, we are coming up with anti-skimming devices.