Pradeep Gaur/Mint
Pradeep Gaur/Mint

Slow growth for white label ATMs

Muthoot Finance is only the third company to launch the service

Muthoot Finance Ltd on Tuesday, 4 February, launched its first white label automated teller machine (WLA) in New Delhi. Muthoot Finance is the first non-banking finance company to launch a WLA service. Two other companies have WLAs—Tata Communications Payment Solutions Ltd, a wholly-owned subsidiary of Tata Communications Ltd, set up the first WLA in India in June 2013, followed by Hitachi, which acquired shares in Prizm Payment Services. All companies have ambitious plans to roll out the service, in the near and distant future.

“We already have the infrastructure ready, specially in rural areas, and so we are going at full steam," said M.G. George Muthoot, chairman, Muthoot Group. Muthoot Finance got the licence in November 2012.

WLAs are similar to other ATMs—they can be used by any domestic debit card holder to withdraw cash, make a balance inquiry, change the personal identification number or ask for mini statements. The Reserve Bank of India (RBI) had issued guidelines in February 2012 and since then 13 entities have received in-principle approval to roll out WLAs. But only three have done it so far.

The WLA operators need a sponsor bank to operate machines. “As per RBI rules, these sponsor banks will be liable to settle transactions and maintain cash at these ATMs," says Navroze Dastur, managing director (financial services), NCR Corp. India Pvt. Ltd, which manufactures and manages ATMs in India.

The guidelines state that the costs associated with transactions at WLAs are to be the same as that charged by normal ATMs. So, the first five transactions in a month are free at WLAs too. And the card issuing bank will pay an interchange fee—15 per withdrawal 5 per balance enquiry—for every transaction at a WLA.

Say, you are a customer of bank X and have not used the free transactions for the month. If you make one of the free transactions from a WLA, you will not be charged but bank X will be. The interchange fee will then be shared by the WLA deployer, the sponsor bank and the service provider. Beyond the set number of free transactions, the card issuing bank will charge you for each transaction.

WLAs are prevalent in many countries, but the progress in India is at a snail’s pace. The intention to roll out WLAs was to improve ATMs per million of population, which is far behind other countries such as China and the US. However, a beneficial cost sharing formula for all stakeholders seems to holding up the idea.