Anytime, anywhere access to money, even in the remotest parts of the country, is critical to take the financial inclusion drive a step further.

Both the regulator and the Government have been working at expanding the reach of banking services in rural areas.

One of the initiatives taken by the RBI was to grant licences to non-bank entities to set up white label ATMs (WLAs) in the country. But a look at the number of WLAs set up in the country, a little over two years after the first licence was handed out, is disheartening. The RBI has issued licences to seven players, of which only three players have more than 1,000 ATMs; the rest have a few hundreds in their kitty. In comparison, banks over the last one year have set up around 20,000 ATMs across the country.

Rural focus The main objective of permitting non-banks to operate WLAs was to expand reach of ATMs in semi-urban and rural areas. Under the RBI’s guidelines, a minimum number of WLAs have to be installed in these areas within a year, depending on the scheme opted by the player. Tata Communications Payment Solutions, which was the first to be granted licence, for instance, has opted for the second scheme, under which they have to set up 15,000 ATMs in three years, with two-thirds in tier III to VI cities. The company is the largest WLA operator in the country with 5,689 ATMs, of which close to 4,000 is in tier III to VI cities.

The other two leading players are BTI Payments and Hitachi Payment Services, which currently have 1,652 and 1,132 ATMs. But the number of ATMs set up by the rest of the players, are far lower in the tally. With the number of transactions failing to scale up in these remote areas, WLA operators have found it difficult to generate revenues and hence expand further.

Removing caps “It is a vicious cycle. Since the number of access points (branches and ATMs) for banking are low, activity in accounts has been sluggish, which in turn may have dissuaded players from deploying new ATMs,” says Sanjeev Patel, CEO, Tata Communications Payment Solutions. So how do you ramp up transactions?

Two immediate measures are to free up the cap on number of transactions, and secondly, to increase the interchange fee that a bank pays to the one that maintains the ATM, at least in rural areas.

With effect from November 2014, banks were allowed to charge customers for using own bank ATMs for more than five transactions a month. Till then, banks only charged customers for transactions in other bank ATMs more than five times in a month.

In rural areas, a cap on the number of transactions can dissuade customers as they are more price-sensitive, and cannot understand the full nuances of the various limits, according to industry players.

Alternate models “Similarly for rural, the interchange fee can be increased from ₹15 to ₹18 to ensure that players are suitably incentivised to deploy more ATMs,” says Sanjeev. WLA operators such as Tata Communications are trying various revenue models to tide over the business until the number of transactions reaches a certain level.

“We have started to advertise on our ATMs because these are retail touch points. We have about 6,000 ATMs, so companies are willing to advertise through our outlets. But for those who have only a few hundred ATMs, generating such alternative sources of revenues may be a challenge,” adds Sanjeev.

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