State bank, ICICI Bank look to outsource ATM management

The deals could be in the range of Rs 4,500 crore & Rs 1,000 crore, respectively.

Following the lead of smaller players, the country’s two largest lenders, State Bank of India (SBI) and ICICI Bank, are looking to avoid the hassle of running their giant ATM networks by outsourcing managed services to third-party vendors.

SBI recently invited bids to manage its 20,000 ATMs and the 5,000 ATMs it plans to open by the end of the current financial year. It has asked interested parties to quote a price per ATM per annum for three years.

According to analysts, the contract to manage SBI’s network for three years would be worth at least Rs 4,500 crore.

ICICI Bank, the country’s largest private sector lender, is also looking to outsource the management of its ATM network, according to people familiar with the development. FSS and Die-bold had been short-listed to manage the bank’s 5,600 ATMs, the person added.

According to industry estimates, given that most such agreements are for four to five years, the size of the deal could be in the region of Rs 1,000 crore.

An ICICI Bank spokesperson said, “We continue to manage our ATM network and it has not been outsourced. We do keep receiving proposals from parties/vendors for outsourcing the management of our ATM network. However, currently we have not taken any decision to outsource.”

A majority of banks already rely on third-party vendors to manage certain aspects of their ATM networks. However, they are now opting to outsource the end-to-end management and pay vendors on a per-transaction or a per-ATM basis.

Last year, SBI entered into an agreement with C-Edge to outsource the management of 250 ATMs on a pilot basis. Smaller banks such as YES Bank and Dhanlaxmi Bank have also adopted this model.

Axis Bank, the country’s third-largest private sector lender, has gone a step further and has entered into agreements under which the vendors will be responsible for setting up new ATMs, apart from managing them. Earlier this year, AGS Infotech and Prizm Payment Services inked a deal with Axis Bank to set up and run 5,500 ATMs for the lender over the next 18 months.

After the Reserve Bank of India (RBI) asked banks to stop charging customers for cash withdrawals, setting up and managing ATMs has become a costly affair for banks. Whenever a customer uses an ATM of another bank, his bank has to pay the bank whose ATM is used an interchange fee of about Rs 18.

In April last year, banks, following a directive from RBI, stopped charging even third-party customers for ATM withdrawals. However, in October last year, banks were permitted to charge customers who had used their quota of five third-party transactions per month.