ATM operators are seeking linkage of the interchange fee to either a price index or any other suitable index as gains from the last revision in the fee has been nullified by the sharp increase in interest rates and rise in transportation costs.

White label ATM operators (WLAOs) are feeling the pinch of rising input costs: a jump in interest expenses on working capital (cash) they get from banks and cash management companies, which transport and load cash in ATMs, passing on the rise in fuel costs.

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“The revision in the interchange fee per transaction (from ₹15 to ₹17 for financial transactions and from ₹5 to ₹6 for non-financial transactions) last year helped us to keep our head above water and deploy ATMs at a faster pace. The deployment by WLAOs earlier used to be about 3,000 per year, but this has jumped to about 6,500 in the last year,” said K Srinivas, MD & CEO, India1 Payments Ltd (formerly BTI Payments Pvt Ltd).

ATM interchange fees are paid by a customer’s Bank (card issuing Bank) to the Bank/WLAO whose ATM is used by the customer (ATM Acquiring Bank/WLAO).

“Since May 2022, two things happened. With interest cost going up, the cash we put into the ATMs has started to pinch us. All the cash that goes into the ATMs is working capital for us. Due to increase in interest rates we are forced to spend a lot more.

“With the general inflation and fuel price hike, the cash management companies have increased the rates for transporting cash and loading the ATMs,” Srinivas said.

Increased costs

There has been a slight softness in transactions in the rural markets as they were impacted significantly during the second Covid wave.

“So, my worry is that if this is not addressed, going forward, ATM deployment rate will slowdown,” he opined.

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Srinivas, who is also a director on the board of the Confederation of ATM Industry, underscored that whatever gains the operators in the ATM ecosystem had with the last interchange fee revision has effectively become null. 

“Now, unfortunately for us, especially the WLAOs, the only source of income is the interchange revenue. While the revenue is capped, the costs have sort of balooned.

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“In fact, on a per ATM basis, our costs have gone up by around ₹4,500-5,000 per month. This has effectively wiped out whatever gains we had from the last interchange fee revision (effective from August 1, 2021),” he said.

Hence, ATM operators have urged the Reserve Bank of India to link the interchange fee to either a price index or any other suitable index. So, if the costs go down, the interchange fee goes down and vice versa.

Too heavy a burden