Is the bank ATM a public good?
3 min read 27 Nov 2013, 01:48 PM ISTThe idea of mandating banks to provide security to ATMs betrays a pitiable lack of understanding of the changing face of public goods
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The unfortunate assault on a woman at a Bangalore ATM took me momentarily back to an incident in my childhood. I was brought up in a place where the state was practically absent. No, this was not a Maoist-infested area but an “industrial township". Only those who have lived there will appreciate the peculiar phenomenon of these townships chugging along despite the absence of the state, because virtually all functions were taken care of by the company to whom the township belonged—schools, hospitals, electricity distribution, sewage, water supply, garbage collection, etc. What about law and order? Well, by extension, this was really absent because policing can’t be outsourced, but we never felt that way as the serious-crime rate was very low.
The problem was that our lack of familiarity with the police apparatus led us to wonder how to handle petty crimes like thefts, which were on the rise. So we banded together to form volunteer groups that would keep vigil at night, in turns. Each household would contribute small sums of money to meet the minimal incidental expenses that volunteers incurred during their nocturnal philanthropy.
Trouble arose when some households refused to contribute, stating that they really did not want the so-called security services. This was indeed a clever ploy, because a volunteer could not selectively re-direct a thief to a house that had not paid a contribution. The system fell apart.
Very early in life, I learnt the importance of the state. By now it is well-recognized that much as we deride the state, we can’t live without it.
But several decades on have we evolved enough in our understanding of what constitutes a public good that the state should provide? The aftereffects of the ATM incident show that we are still ambivalent about it. Our idea of a public good is centuries old.
The implied belief is that an ATM is a bank’s product, meant for the bank’s customers, and hence its security is the bank’s problem, i.e. it is not sufficiently “public". The subtext, sometimes articulated, is that since 60% of the adult population does not have a bank account, an ATM is essentially an elitist construct, not worthy of being within the protective cover of the general law and order setup. The Reserve Bank of India’s (RBI’s) obscure diktat to banks to provide adequate security to ATMs and the Karnataka government’s summary closure of ATMs because of non-compliance with the security-guard requirement are emblematic of this muddled thinking.
What everyone conveniently forgets is that an ATM is not tied to the mother bank—the free usage of another bank’s ATM (up to a fairly liberal limit) has made the ATM a near-public place.
I have myself not used any of my own bank’s ATMs for the past three years, depending on other banks’ ATMs that are closer or more convenient. And we now have biometric ATMs, making them truly egalitarian. Banking usage exploded not with branch but ATM expansion. And it is more egalitarian than Internet banking—not just because very few have Internet connection but because it provides cash withdrawal in a predominantly cash economy.
In most parts of the world, security guards in three shifts at ATMs are an anachronism. Had that been mandatory, many banks would have eroded their capital adequacy even without writing subprime mortgages. And untoward ATM incidents occur not just in India or Africa but in paragons of modernity such as the US and the UK, and also in the little-Indias that have lost their way in Europe—France and Italy. They rightfully expect the state to protect the ATMs, many of which are not even kiosks but literally holes in the wall.
But why did banks meekly acquiesce? They should have had enough ammunition in the form of arguments and numbers to show that the ATM is indeed enough of a public good, and expose the Karnataka government’s vacuous sovereign hubris and dereliction of responsibility, in a professional manner. One easy explanation is that they did not want to upset the state, but a more subtle reason is the typical Indian guilt about making money. Banks know that theoretically, even with three security guards, the cost savings of an ATM vis-à-vis a branch (both capital and operating expenses) are so high that perhaps they should be morally obliged to arrange for their own security instead of demanding it of the state.
The next time I see a yawning security guard at an ATM, I will advise him to let customers in, but re-direct a machete-wielding assailant to the ATM next door that does not have a guard.
The author has been a senior research analyst on financial services as well as other sectors at various investment banks, and is currently an independent consultant focusing on banks and financial services.
