ATMs to become virtual bank branches, accept deposits with instant credit

Nearly 95 per cent of replacement orders for automated teller machines (ATMs) are for new-age recyclers, which not only dispense cash but also allow deposits that get reflected in the account immediately.

It has set the stage for ATMs to don the mantle of a “virtual branch network”, and become a remittance channel in its own right, thanks to inter-operability of these machines.

Close to 14.6 per cent (or 35,000) of the 240,000 ATMs in India are new-age recyclers, even though they have been around for only 3 years on the local landscape.

Further, 95 per cent of the annual replacement orders (for 12,000-odd ATMs) is for recyclers despite their cost being Rs 5.5 lakh per unit, against Rs 3 lakh for conventional machines.

“The biggest change-agent is the RBI and National Payment Corporation of India’s (NPCI’s) move to allow inter-operability among banks, and white-label players opting to put up recyclers,” said Loney Antony, vice-chairman of Hitachi Payments and co-chairman of the Payments Council of India.

Until now, recyclers were largely placed within banks’ branches. “It was used as a teller-replacement tool, or for self-service. You went and deposited cash with no human interface. However, with inter-operability, recyclers will be set up off-site too,” he added.

Inter-operability of recyclers means one can deposit cash in any such machine the way they would withdraw the same from an ATM. Of course, this comes at a price — Rs 50 for every Rs 10,000 deposited — which is more than 3x the Rs 15 customers pay as inter-change if they were to withdraw the same amount.

The higher transaction fee for depositing cash at recyclers has more to do with the inability of the ATM business to absorb operational costs, and less to do with any superiority in service being offered.

“They (recyclers) help cut operating costs for the business in a big way as they reduce cash-loading charges,” said Stanley Johnson, head (banking outsourcing), AGS Transact Technologies.

Banks have refused to hike the charges they pay to cash-in-transit firms that now have to spend more to comply with the Ministry of Home Affairs’ enhanced security drill when moving around cash.

This, coupled with the fact that Rs 500 notes are more in circulation than Rs 2,000 notes, results in more trips by cash vans to replenish ATMs with currency of lower denomination.

A big multiplier effect with the installation of recyclers is that owners of small businesses can deposit the surplus in daily cash balances, which is credited to their account immediately — all this without visiting a bank branch.

This will also lead to the emergence of the ATM channel as a remittance channel.