White Label ATM Operators (WLAOs) want the Reserve Bank of India (RBI) and the government to consider setting up a fund to support faster roll-out of ATMs in the hinterland.

White Label ATMs (WLA) are those set up, owned and operated by non-banks. WLAOs are given licenses by the RBI to primarily set up ATMs in under-served semi-urban and rural areas. 

They are also seeking slightly higher interchange fees (which are paid by a customer’s bank when he/she uses a WLA) as revenue generated from ATMs in rural and semi-urban areas is usually less than costs incurred.

Rustom Irani, Managing Director, Hitachi Payment Services, observed that while digital banking penetration has been increasing over the last few years, cash in circulation too has been rising year-on-year. 

“And we are probably at an all-time high when it comes to cash in circulation. So, the economy still depends quite a bit on cash. Even more so in the unorganised sector and rural areas.

“So, the need for cash is that much more pronounced. Our ATM deployments are primarily in semi-urban and rural areas. And this is where WLAOs play a crucial role,” said Irani, who is also on the Board of Confederation of ATM Industry.

Revenue pool

Irani noted that the number of ATMs at 2.54 lakh (as at February-end 2022) was woefully inadequate to serve a vast country like India. This network needs to go up to about 4 lakh in the short-term.

He underscored that the telecom sector’s Universal Service Obligation Fund (USOF), whereby a small portion of telecom service providers’ revenue is pooled into the fund for network extension into the underserved and unserved areas, can be replicated in the ATM space, furthering the cause of financial inclusion.

Referring to the RBI allowing an increase in interchange fee for ATM transactions from ₹15 to ₹17 per financial transaction, and from ₹5 to ₹6 per non-financial transaction last year, he said this is helping WLAOs just about keep their nose above water.

Interchange fees

As WLAOs depend on interchange fees as the primary revenue source, a slightly higher interchange would have helped, allowing WLAOs to deploy ATMs faster and improve penetration.

The Report of the Committee to Review the ATM Interchange Fee Structure had recommended that to encourage more ATMs to be installed in under penetrated areas, which do not have adequate infrastructure for use of alternate payment systems like UPI/ QR Code/ POS machines/ Online banking, a differential Interchange could be considered.