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Banks do not plan to ease up on their ATM expansion drive despite the Reserve Bank of India's plans to allow non-banks to set up white label ATMs (WLAs), say bankers.
ATMs are an important part of banks' alternative channel strategy to reach customers, to showcase their products and services, and create brand awareness. This is reflected in the increase in the number of ATMs in the April 2011-January 2012 period, during which banks added 14,477 ATMs. At end January 2012, the country had 89,655 ATMs, according to the National Payments Corporation of India.
Banks will deploy their own ATMs because it helps to retain customer loyalty. If WLAs becomes a reality, they may tweak their strategy by focussing on putting their own ATMs in areas where they have a high customer density.
A white label ATM may work in an area where real estate/ rental charges are very high or in smaller centres where banks may not want to set up their own ATMs.
While welcoming the RBI's move to allow WLAs to ensure penetration of the ATM network in the country, bankers caution about the pitfalls — customers could be inconvenienced in case of failed transactions on WLAs as the dispute resolution mechanism will involve three entities — the WLA operator, the sponsor bank of the operator, and the customer's bank.
Currently, in the case of failed ATM transactions, the customer has recourse to his bank, though he may have transacted at another bank's ATM. Another issue that non-banks setting up ATMs could face is whether a customer would be ready to pay charges for transacting on WLAs.
Service providers gung-ho
The development of ATM services in any market goes through certain phases. Banks use ATMs first for product differentiation and branding and, in the next phase, for customer acquisition and retention, explained Mr Loney Antony, Managing Director, Prizm Payment Services.
“It was imperative that the RBI permit white label ATMs. It was only a matter of time. The main concern for the RBI was the regulatory framework, but with several banks outsourcing ATM management, white label ATMs are a natural extension,” said Mr Antony.
Except in the US, in all markets that allow white label ATMs, the share of such ATMs is no more than 25 per cent of the entire ATM network. They are always complementary to bank ATMs.
According to Mr Rajiv Kaul, Executive Vice-Chairman and CEO of CMS Info Systems, white label ATMs will bring more efficiency and help keep ATM set-up costs down. However, certain issues need to be ironed out, such as the guidelines related to sponsor banks.
In the last two years India has seen lot of ‘brown label' ATMs, or outsourcing of ATM services by banks. Hence, market players are awaiting the final guidelines to see how the WLAs will be different.
Today there are managed-services outsourcing companies that perform such functions as switching, cash management and technical management for banks.
About 50-60 per cent of the ATMs in India are already outsourced in some way or the other.
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