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Priya Nair
N.S. Vageesh

Balancing costs and services could be a taxing job. Exactly why banks are outsourcing the running of ATMs.

OUTSOURCING may be a dirty word in some parts of the world. But for banks in India, it is the preferred route to manage their Automated Teller Machine (ATM) networks.

And from the looks of it, the trend is here to stay. It is a win-win situation for the bank, the service provider and the customer.

By not having to worry about managing their ATM networks, banks are free to concentrate on their core banking functions.

For the service providers, who are specialists at the job, it is a major source of revenue. They are also able to offer value-added services as they have the domain knowledge.

For customers, the advantage is less or almost nil downtime at ATM centres, which are today doubling up as quasi banks.

What it involves

Managed services or outsourcing technical services means that banks tie-up with a company that takes care of everything — from setting up the ATM and monitoring it, to dealing with the multiple vendors in case of a fault, cash management, and providing back-office functions like a help desk.

The providers of managed services are NCR India, Diebold Systems and Euronet. These service providers have centres manned by a team of specialists who track the performance of an ATM network.

They take care of the maintenance, monitoring and management of ATMs from a remote centre.

NCR India recently inaugurated one such centre at Powai, Mumbai, that has the capacity to monitor and manage remotely about 25,000 ATMs. The total ATM count in the country is currently about 17,000.

"Remote diagnosis helps in solving the problem quickly and reduces costs associated with actual field calls by engineers and support staff," says Deepak Chandnani, Managing Director, NCR India.

"We have a model that can predict cash replenishment needs and increase the uptime of ATMs significantly," says Rupinder Anand, Director, Professional and Managed Services, Diebold Systems.

NCR India has support centres in over 113 locations, covering over 800 cities in India. The company offers services for both ATM deployment and management.

Chandnani says, "The services begin with Total Installation Services (TIS) which include actual construction and civil work, to interior décor and infrastructure facilities (power, AC, and so on) and right up to the actual installation and monitoring and management of the ATM. After the ATM deployment, NCR can take care of the entire management and monitoring of the ATM network."

Euronet India, which services both private and public banks, recently announced a tie-up with Centurion Bank to manage and service over 150 ATMs of the Bank.

Loney Antony, Managing Director, says, "We provide services that take care of running, operating and managing the ATMs. We make sure that the uptime is high, or that the ATMs are available for operation all the time. Over 85 per cent of our business is from managing ATMs."

HDFC Bank began the process of managed services for ATMs in December 2004. The pilot project was launched in Mumbai, where over 80 offsite ATMs were handed over to NCR for monitoring and incident management. The Bank has 597 offsite ATMs out of a total of 1097.

Rahul Bhagat, vice-president, Head-Direct Banking Channels, HDFC Bank, says, "As of now, NCR takes care of monitoring and incident management for our offsite ATMs and monitors our branch ATMs. Monitoring means that if the ATM is down, the company informs the bank and incident management means the company also resolves the problem."

HDFC Bank has now extended the managed services to Bangalore, Cochin and Hyderabad. Chennai is the next city in line.

What's stopping them from going the whole hog, if outsourcing is the future trend?

Answers Bhagat, "You can't just hand over the channel to someone else. You need to know that your partner is doing the job effectively and is focusing on your business."

Public sector also in the fray

Not just private banks, public sector banks too have begun to realise the importance of outsourcing their ATM networks.

D. Krishnamurthy, General Manager at Bank of India, says, "Our decision to outsource the activities was mainly due to cost and also the lack of expertise in maintaining the whole gamut of ATM services. We have to attend to only identifying the location and marketing of the ATM. All other problems are taken care of by the service provider."

Chandnani points out, " Some of our key customers are public sector banks, including SBI, with the largest ATM network in the country"

On the savings front

The cost factor is another big consideration. Rupinder says, "By handing out ATM-related functions and management of ATM networks to service providers, banks can cut costs by 10 to 15 per cent."

According to Chandnani, "banks can save anything between 10 and 30 per cent of their operational costs of managing the ATM channel."

Krishnamurthy says the cost of some of the services is exorbitant like rent in certain cities and cash management in busy centres. With outsourcing, the cost of the service is fixed and protected from increase.

The service providers also provide an additional source of income to the bank, by way of commissions from the value-added services.

Loney says, "For value-added services, like mobile-top ups, we get commission from the telecom companies. So, we generate extra income for the banks."

ATM availability also increases to more than 90 per cent. At the same time, the service provider offers the convenience of a single-point contact for banks to deal with varied vendors and services.

As Bhagat says, "There could be various reasons for the ATM being down, such as the UPS or the air-conditioner not working. So we will have to speak to multiple vendors to resolve it.

In case of a managed service, there is a single-point contact for multiple vendor management."

This leaves banks with more time to concentrate on their core banking functions, as H. Srikrishnan, Executive Director of Yes Bank, says.

Yes Bank too will be outsourcing the maintenance of its ATM network. Srikrishnan says, "By outsourcing IT functions, including ATMs, we can focus on our core customer relationship competencies. ATMs are core for banks from a customer perspective, but management is not the bank's job."

Centurion Bank too hopes to benefit from the domain experience of the service provider.

Anil Jaggia, Chief Co-ordinating Officer, Centurion Bank, says, "As markets evolve and new products come in, banks would be wasting time if they were to manage their ATMs. So, it is easier if we outsource ATM management."

Picture by S. Siva Saravanan

priyan@thehindu.co.in

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