White-label ATM firms get breather as RBI allows direct sourcing of cash

Move to allow them to source cash directly from Mint Road comes as a big relief

The move to allow white-label ATM players (WLATM) to secure cash directly from Mint Road has come as a new lease of life for these entities. But will it help them boost their bottom line in the long term?
 
“Cash has been a headache for WLTAMs, given that the banks used to give preference to loading cash in the ATMs deployed by them. This will change, and it is hoped that it will give them a breather, operationally,” said Suneel Aiyer, chief executive of Writer’s Safegaurd, a cash management firm.
 
As on date, there are eight WLATM operators in the country — AGS Transact Technologies, BTI Payments, Hitachi Payment Services, Muthoot Finance, RiddiSiddhi Bullions, SREI Infrastructure Finance, Tata Communications Payment Solutions, and Vakrangee. However, the total numbers of ATMs deployed by them is under 20,000, and way below the bid terms of the Reserve Bank of India (RBI).
 
If you were to go by the strike rate set by the central bank in 2012 for deployments, WLATMs would have sprouted all over the place. In the very first year of operations (based on schemes that operators opted for), 1,000-25,000 ATMs would have been added. Hence, if there were five operators, there would have been between 5,000 and 125,000 ATMs in the debut year alone.
 
So, will securing cash directly from Mint Road make life easier for WLATMs? “As on date, the scheme is being gradually rolled out across the country; it can’t be done in one go as cash availability and the logistics involved has to settle down first,” says Loney Antony, vice-chairman of Hitachi Payments and co-chairman of the Payments Council of India.
 
There also whispers in the ATM industry that the original bid terms for WLATMs may be revisited. This is because newer players have evinced interest in entering the industry, provided the commercial viability of the model is reworked. In the past, Mint Road had not budged from its position even though the current crop of WLATM operators had pleaded their case before the central bank.
 
The issue of free swipes is also up for review. While it’s not clear it this is on the agenda of the committee that has been set up to review the current inter-change of Rs 15 and raise it to Rs 18, it’s been gathered that free swipes will be at four hereon — a change from the three free transactions in a metro and five in non-metros.
 
“Basically, we are looking at a mid-point. That’s the only way it can work for the non-frill account holders opened under the Pradhan Mantri Jan Dhan Yojana. To make direct benefits transfer better, ATMs are a key cash-out point. While the issue of free swipes does not affect WLATMs, the reality is that not many swipe their cards at these outlets. If 100 people queue up at a bank’s proprietary or brown-label ATM, only 40 go to WLATMs.
 

It’s very hard to get folks in the lower tier towns go to WLATMs, given that they associate banks with ATMs.  There is also empirical evidence available to prove this lack of traffic at WLATMs, from the way brown-label ATM deployers bid for the rate per transaction (RPT) — the fee they get for every swipe — to be charged to banks, for a tender of 63,000 ATMs floated by the North Block in 2012.
 
AGS Transact Technologies’ RPT bid was Rs 12.10. We don’t know how Prizm, FIS, Mphasis, Electronic Payment Systems and TCPSL bid, but it’s been gathered that one brown-label contender’s bid was as low as Rs 7, and that the bid-range by this lot was between Rs 7 and Rs 12.10.
 
Now, if inter-change fee at Rs 15 is a sore point for WLATMs, then how some in their brown-label avatars bid low on the RPT (technically it’s not inter-change, but that’s what you earn at the end of the day) is the question.
 
It was also pointed that the brown-label business model was different. People come into brown-label ATMs as the signage is that of banks; they are deemed as banks’ outlets.
 
Typically, 60 per cent of all swipes are at banks’ own ATMs, with the rest at ATMs of other deployers. Again, you get to earn an RPT on 100 per cent of the transactions. “You can’t extrapolate RPT bids into WLATMs”, said a senior functionary in the WLTAM business. There’s another matter of detail — the inter-change for WLTAMs is not Rs 15 but Rs 13, as Rs 2 goes to the sponsor bank. That’s because only banks can be part of the Mint Road settlement system.