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Over-arching ambitions and conflicting goals have landed the ATM ecosystem in quicksand
A SLIVER OF HOPE IS IF THE RBI WERE TO BUY THE PLEA THAT THE INTER-CHARGE SHOULD NOT BE LOOKED AT AS A FLOOR FOR CUSTOMER-FACING PRICING EVEN WHEN HIKED
Mu ll on these numbers: On November 8,2016, there were 240,000 ATM sin the country. At the end of September 2018, the figure is much the sameat239,321.
You need tobe brave to be in the till-box business: whether you are banks, brown-and white-labeldeployers, ATMvendors, orcash logistics companies( C LC )— all are in disarray. Every actor in this cast has muffed up the lines and the roles they were to play .“I concede it’ s a divided house. Everybody has their own agenda ”, said LoneyAntony, managing director of Hitachi Payment Services and co-chairman of the Payments Council of India.
The flat run-rate in the ATM base is due to the poor financial viability of running the channel. Bigger deploy e rs such asHDFC Bank, Axis Bank, and I CI CI Bank find the inter-change fee of ~15 per transaction( when customers of other banks swipe theircards) low. Brown- andwhite-labelplayers got their business models wrong and bid out-of whack for both the rateand at Mint Road’ s white-label ATM roll-out scheme in2014.
The latest hurdle is the norm for CL Cs which stipulate a net-worth of ~1 billion to bring them on a par with payment banks which they can’ t comply with soon enough. Somewhere in between all of this, demo net is at ion erupted, further up setting everybody’ s books.
The source of the industry mess can be traced to brown label firms’ bid forth eR PT to be charged to banks. This happened when a tender for 63,000 AT Ms was floated by North Block in 2012; AT Ms were a key“cash-out” point in the direct-benefits transfer part of the government’ s wider financial inclusion plans.
TheRPT bid so fAGS Trans act, Prizm(now Hitachi), FIS, Mphasis, Electronic Payment Systems, and Tat a Communications Payment Solutions’ ranged between ~7 and
~12.10. Nowtechnically, theRPTis not the same as inter-change but that’ s what you get to pocket for every swipe of the plastic.
“If inter-change at ~ 15 is seen as a sore point now (for white label firms and banks), how come some, in their brown label avatars, bid low on the RPT? It was suicidal,” points out Navroze Dastur, managing director of NCR (India) which has over a 50 per cent market share of the ATM market (for vendors).
It’ s unlikely he would have said so back then as the prospect of high ATM sales made everyone’ s eyes pop out. The comeuppance is that it’ s come back to bite vendors too.
NCR, Diebold-Nixdorf, Nautilus Hyosung, Lipi Data Systems, Vortex and GR G have to grin and bear poor sales in what was, until five years ago, touted as one of their biggest global markets. The forecasts provided by London-based Retail Banking Review, a strategic research and consulting firm, areo ut ofline. The installed ATM base for 2018 was predicted to be 373,000; 339,000in 2019; 373,000in2020; and407,000 in 2021. Given that the September figure of just 239,321 ATM sin India, the predictions were off by a good 133,670units. Infact, even the earlier estimate for 2017(280,000 units) was also wrong by 40,000.
“I have stopped looking at the Retail Banking Review data ,” said A nth ony. Dasturc on curs :“The red lights were flashing even then, but there was all round exuberance .”
The exuberance has been replaced by red faces. If all this was not bad enough, the year after demo net is at ion saw banks focus on re wiring their ATM sand speeding up the usage of digital banking with the trade-offs involved with the branches as a channel.
“Viability issues and new investments that banks and deploy er sneed to make in order to comply with the new standards for new cash management and ATM security means more costs to an industry that was already under pressure ,” notes Him an shu Pu jar a, managing director of Euronet Services.
The Indian Banks’ Association has sent a letter to Mint Road that among CL Cs only C MS, AGS, and Checkmate—currently have a net worth of ~1 billion and made the persuasive argument that the new requirement“can create a monopoly… if the time lines are not extended, it may affect ATM operations”.
The only sliver of hope is if the Reserve Bank were to buy the plea that the inter-charge should not be looked at as a“floor for customer-facing pricing” even when hiked. The plea seeks to make a distinction between wholesale pricing( among institutions) and what you and I are to cough up. It is unlikely to get a sympathetic ear given the anger towards what’ s generally perceived to be high bankcharges.
For now, the ATM industry is out of cash.