Micro-ATM operators seek higher transaction fees to match legacy ATMs

Micro-ATM operators have sought a revision in transaction fees, urging the government to align their payouts with those of legacy ATMs amid rising volumes and decade-old stagnant pricing

The move to allow cash withdrawals through micro-ATMs via the Unified Payments Interface (UPI) has once again brought the spotlight back on the pricing of such transactions vis-à-vis legacy ATMs. The issue has been raised with the Department of Financial Services, with micro-ATM players seeking parity in treatment with traditional ATMs.

 

Sources in both the Business Correspondent Resource Council and the Business Correspondent Forum of India said the government should consider a 50-basis-point increase in micro-ATM transaction rates. Ideally, a comprehensive costing exercise should be undertaken to determine the optimal transaction fee that ensures the sustainability of banking agents.

 

Operated by business correspondents (BCs), micro-ATMs are devices equivalent to point-of-sale terminals, or a miniaturisation of ATMs — in effect, a portable ATM enabled through the Aadhaar Enabled Payment System (AePS). A BC currently earns only 0.5 per cent of the ticket size or Rs 15, whichever is lower. On an average ticket size of Rs 2,000, a BC earns Rs 10, but after factoring in the bank’s share, the fee paid to the National Payments Corporation of India (NPCI), tax deducted at source, and goods and services tax, the BC agent nets only Rs 5-7.

 

This is much lower than the interchange for ATM cash withdrawals — the pay-out by a card-issuing bank when a customer withdraws cash from another bank’s ATM, including white-label ATMs — which was raised to Rs 19 from Rs 17 in March this year. 

 

In effect, the gap between the ATM interchange for cash withdrawals and micro-ATM pricing has widened to Rs 4. Cash-in, cash-out (Cico) transactions remain the mainstay of BC earnings, accounting for more than 60 per cent of their income. However, there has been no revision in pricing for over a decade.

 

The latest development allowing cash withdrawals at micro-ATMs via UPI marks an important step towards making the cash withdrawal process more inclusive and user-friendly by leveraging UPI’s digital payment ecosystem. It supplements AePS and card-based transactions by offering customers a convenient alternative — scanning the dynamic QR code displayed by BCs and authorising the transaction through a UPI app.

 

According to the Reserve Bank of India’s latest monthly bulletin, 996.95 lakh transactions were processed through 14.67 lakh micro-ATM outlets amounting to Rs 25,574 crore. In comparison, legacy ATMs handled 4,472.41 lakh transactions worth Rs 2,32,955 crore across 260,000 ATMs. 

 

How does a micro-ATM work? Suppose you want Rs 2,000 in cash from a BC (a kirana store or any merchant outlet can act as one). You swipe your debit card, and the amount is handed to you from the store’s cash till. Simultaneously, while the cash from the store moves to you, an equal amount is credited to the store’s bank account. If this account happens to be a savings account, it begins to earn interest rather than lying idle. It’s a win-win for both the customer and the dispensing agent.

 

The growth of micro-ATMs must also be seen alongside trends in the ATM market. At present, there are around 260,000 ATMs. After years of lull, request-for-proposals floated by banks indicate an order book for 17,000 new ATMs, including recyclers and cash-dispensing-only units. It is believed that this renewed interest — the first since demonetisation, when the installed base stood at 220,000 units — will aid direct benefit transfers by adding more cash-out points.

 

What remains unclear, however, is the eventual impact of micro-ATMs on the ATM network. While cash-out through micro-ATMs is not a 24x7 facility, the increasing adoption of these devices could still affect the business dynamics of traditional ATMs.

 

> A BC gets only 0.5 per cent of the ticket size or Rs 15, whichever is lower. On an average ticket size of Rs 2,000, a BC gets Rs 10, but after taking into account the bank’s share, the fee paid to the National Payments Corporation of India, tax deducted at source, and goods and services tax, the BC agent gets only Rs 5-7.

 

> The interchange on legacy ATMs — the pay-out by a card-issuing bank when you withdraw cash at other banks’ ATMs, including on white-label ATMs — was raised to Rs 19 from Rs 17 in March this year.

 

> In effect, the gap between the ATM interchange for cash withdrawals and micro-ATM pricing has increased to Rs 4.

 

> According to the RBI’s latest monthly bulletin, 996.95 lakh transactions were put through 14.67 lakh micro-ATM outlets amounting to Rs 25,574 crore. The same at legacy ATMs were 4,472.41 lakh transactions amounting to Rs 2,32,955 crore (via 260,000 ATMs).