Mumbai: Recently, the Reserve Bank of India (RBI) set up a committee to review the automated teller machine (ATM) interchange fee. The committee is based on the recommendation during the second bi-monthly monetary policy this month. The committee will review the existing structures and patterns of costs, charges and interchange fees for ATM transactions, the overall patterns of usage of ATMs by cardholders and assess the impact on charges and interchange fees, assess the entire gamut of costs in respect of the ATM ecosystem and make recommendations on the optimal charge and interchange fee structure and pattern. It will have to submit its report within two months from the date of its first meeting. On Friday, the RBI has recommended certain security features for ATMs such as cash replenishment only with digital one-time combination (OTC) locks, grouted structure and comprehensive e-surveillance mechanism at the ATMs to ensure timely alerts and quick response. What do these changes mean for you? Let’s take a look.
The story so far
After demonetisation on November 8, 2016, the ATM industry has been seeing a fall in profitability. Apart from demonetisation, the ATM industry had to comply with new rules for security imposed by the apex bank. According to ATM service providers, the cost of improving security measures was turning out to be expensive and initially no one was willing to take the cost. In order to get clarity, the ATM industry through National Payment Corp. of India (NPCI) approached the government to revise the interchange fee and certain other recommendations. So far the ATM service providers had been in wait-and-watch mode. Now with the RBI setting up a committee to look into the charges, you can expect a verdict on it. “Our assessment is that the committee will look at overall cost required to run the channel. They will take into account some of the recent mandates issued by RBI in terms of ATM security measures and EMV, revised cash carrying guidelines issued by the ministry of home affairs and also on the most recent circular on security measures. They will do a cost analysis exercise to arrive at the interchange fee that is paid by the issuer to the acquirers," said Himanshu Pujara, MD, Euronet Services India Pvt Ltd.
The interchange fee is mostly likely to be revised upward. “Interchange fee is always an interbank fee. It is paid by the issuing bank whose cardholders use the ATM of another bank —the acquiring bank. There is no real fee that is passed on to the consumer. Of course, the customer pays if she crosses the number of free transactions, which is three in metros and five in non-metros," said Pujara. However, ATM service providers say the impact will not affect consumers immediately considering the country is looking at promoting digital transactions. “As a consumer, you will not see a major impact if there is a revision in the interchange fee. Some day the cost will have to get passed on to the consumer. We all had subsidy in petrol and we were paying ₹40 and overnight it changed to ₹70. We can’t live in the economy of subsidy for too long. If there is a convenience, customer has to pay for it. The only reason they might not pass on to the consumer now is because they want to promote digital transaction," said V Balasubramanian, president, Merchant & Terminal Business, FSS.