Money & Banking

‘Cash is not going to go away; its use has risen post demonetisation’

K Ram Kumar Mumbai | Updated on May 21, 2018 Published on May 21, 2018

But the payment landscape is expanding, says chief of payment solutions firm AGS


Payment solutions provider AGS Transact Technologies plans to deploy one lakh point-of-sale (POS) terminals in FY19 even as it wants the interchange fee issue resolved before it restarts ATM deployments. The company’s CMD Ravi B Goyal, a hardware engineer-turned-entrepreneur, began with marketing computer-aided textile designing software and diversified into dispensing systems for paints, inks, and pigments, among others, in the mid-1990s. He subsequently launched AGS in 2002.

In an interview with BusinessLine, Goyal said that with the digital banking landscape expanding fast, his company is constantly upgrading its infrastructure to facilitate digital payments. Excerpts:

How has the digital banking landscape evolved post demonetisation?

Cash in circulation now is more than the pre-demonetisation level. The number of transactions, the volume getting dispensed through ATMs is much more than the pre-demonetisation level. Cash is not something which is going to go away. However, the whole payment landscape is also expanding. And in that there is going to be cash, card, wallet, unified payments interface (UPI), immediate payment service (IMPS), internet and mobile banking. All these will co-exist. As a technology provider, we want to basically make it convenient for the consumer as well as the merchant and give them the freedom to choose how they want to transact.

Why have ATM deployments slowed down?

There are two kinds of ATMs — onsite and offsite. The success of an offsite ATM completely depends on its location. We have seen in the past seven-eight years that some of them don’t give you transactions (volumes). And, if an ATM is not giving the required number of transactions in four-six months, you have to relocate it.

The number of transactions — and the volume of cash dispensed — is far more than during pre-demonetisation. So, there is nothing wrong in the ATM channel. We manage about 40,000 ATMs and we have been doing 5-10 per cent relocation every year, all the time.

After demonetisation, the cash started coming in only in June-July 2017. So, the banks did not really budget any ATM deployments. But this year, ATM deployments will pick up. Those receiving direct benefit transfer in their accounts will need access to ATMs to withdraw cash. A cash withdrawal by a customer at the branch costs a bank ₹60. At an ATM, it will cost the bank ₹15 (interchange fee) at most. So, for any bank, ATM is the cheapest mode of cash dispensation.

Why have white label ATM (WLA) operators frozen ATM deployments?

Honestly, we still believe that WLAs have a great future. Globally, banks deploy ATMs onsite. All offsite are deployed by a third-party called independent service organisation (ISO).

The business model overseas is that customers are charged a convenience fee by ISOs. In India, the regulator says that you (WLA operator) cannot charge a convenience fee but you will get an interchange fee.

For banks, when it comes to (allocating) cash, the first priority is their branches, followed by their own ATMs and WLAs. WLAOs pick up whatever cash is left. The interchange fee and erratic supply of cash cause a problem. Otherwise, this model is going to be ‘the model’. Right now, it is not viable for us. But we are working very closely with the National Payments Corporation of India and the Confederation of ATM Industry and also meeting with the regulator. I am sure we will find some solution. Our request has been to restore the interchange fee to ₹18 against the current ₹15.

What are your investment plans?

Investments are on going in the cash-in-transit business, ATMs, recyclers, field-level maintenance and monitoring activity. We have built the right infrastructure to cater to banks. We have made ₹1,000 crore-plus investment so far…we have plans to tap the capital market (through an)... IPO.

Two private equity players, TPG (invested in AGS in 2011) and Actis (2012), together hold a 42 per cent stake in our company. They have invested around ₹400 crore. The process of buying them out is almost at the closing stage. Once the process is complete, I will be owning about 96-97 per cent.

What innovations are you working on?

We are enabling merchants to accept all kinds of digital payments in POS machines — by card, wallet, UPI, QR (quick response) code, Aadhaar Pay. We have 60,000 POS terminals. We will deploy a lakh more this year as we are making inroads into tier-II and tier-III cities.

Published on May 21, 2018
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