White-label ATM growth in limbo over PSB response

More than a year after the first white-label automated teller machine (ATM) was launched in India, many entities are struggling with the rollout. What has made the situation sticky for operators of such ATMs is the fact that no public sector bank (PSB) has come on board.

"We have private banks on board; not having any PSB has become a challenge," said Loney Antony, managing director, Prizm Payments, a white-label ATM operator.

K Srinivas, managing director and chief executive, BTI Payments, says, "Generally, state-run banks have better coverage, in terms of branch network in rural areas. As a result, it is much easier if a PSB comes on board. Otherwise, aspects such as availability of cash are challenges in smaller areas."

Sponsor banks are responsible for cash operations, deployment and dispute resolution management, if the need arises.

Centralised activity of buying ATMs had made many PSBs refrain from tie-up with private service providers, said a senior Indian Bank's Association (IBA) executive. He added recent changes in norms for pricing altered cost dynamics, leading to fewer customer visits to ATMs, especially of non-home entities.

White-label ATMs were introduced to increase the network of these machines in semi-urban and rural areas. Companies in this segment are mandated to open 67 per cent of their ATMs in rural locations (tier III-VI) and 33 per cent in urban ones (tier I and II cities).

The low interchange fee (the amount a bank has to pay a white-label ATM operator if its customer makes a transaction at the latter's ATM) a concern for operators. Currently, the fee for white-label ATMs and bank-deployed ATMs is the same - Rs 15 for a cash transaction and Rs 5 for a non-cash one.

Sanjeev Patel, chief executive, Tata Communications Payment Solutions, says the cost incurred by an operator is much more. "We have to spend money in cash deployment to far-flung areas. We also incur higher costs in terms of electricity, satellites, etc, in rural areas. As a result, there should be a separate interchange fee for white-label ATM operators."

Though the operators are mandated to tie up with financial and non-financial entities for advertising, they haven't managed to rope in many partners. Due to this, such ATMs aren't financially viable.

Bank-managed ATMs offer stiff competition. "We have tied up with several white-label ATMs but sometimes, my bank management is not comfortable with it. This is because if we have another ATM close to that area, it could lead to cannibalisation. As a result, we have sponsored white-label ATMs, but we can't after a certain point," said an executive from a private bank that has been aggressively expanding its ATM network.

Operators are hoping the Pradhan Mantri Jan Dhan Yojana will provide them a boost, as several customers in rural areas will be given debit cards and banks are expected to set up more ATMs in the hinterland.
SORRY, THIS ATM IS TEMPORARILY OUT OF SERVICE

What is a white-label ATM?

• A white-label ATM (WLA) is not owned by a bank but by a private service provider
• WLAs are aimed at driving penetration across Tier-I to Tier-VI markets
• Customers of any bank can access these ATMs
• WLAs have been established to increase penetration in semi-urban and rural areas

Active Players in WLA Space

• Tata Communications Payment Solutions
• Muthoot Finance
• NCR
• Prizm Payments
• BTI Payments

Hurdles in WLA Growth

• No state-run bank has tied up with a WLA operator
• Low interchange fee, high operation costs make financial viability tough
• Bank-managed ATMs and WLAs in the same area could lead to cannibalisation
• Operators finding it tough to tie up with other players for advertising