Interchange of Rs 17 at ATMs is not viable: Navroze Dastur of NCR Corp

In a Q&A, the country managing director of the world's largest ATM maker, says he sees a lot of banks come to firms such as his to run their ATM network for them in the future

The deployment of automated teller machines (ATMs) has peaked of late, and stands a shade under 260,000 units after a lull, post-demonetisation. But operational costs continue to affect deployment with the interchange being a sticking point. Navroze Dastur, regional vice-president (Asia Pacific) and managing director (India) of NCR Corporation, the world’s largest manufacturer of ATMs, spoke with Raghu Mohan on issues facing the industry. Edited excerpts:

There was not much by way of ATM deployment during the past five years, But of late, they have picked up. How do you view the plot at this point in time?

We have close to about 258,000 ATMs, and are seeing an uptick in deployment. It’s largely coming from white-label deployers and a few government banks that have come out of their rationalisation mode--due to the mergers and acquisitions which have happened. So, rationalisation has taken place on branches and the ATM network as well.

WATCH | Exclusive chat with Navroze Dastur, MD, NCR Corp, on the future of ATMs

Do you see banks revisiting their ATM strategies, since digital has picked up in a big way? As in, a trade-off between the ATM and digital channels?

While I think digital is very much here to stay, cash is not going out. If you see the total cash in circulation in the economy today, it’s going up and up despite digital volumes having really shot up. We are seeing more ATM deployment happening in tier-3, tier-4, and tier-5 cities; it will not grow in the metros where we have reached a sizeable number.

A sticking point has been the interchange. It's now at Rs 17, but still a rupee lower than what it was in 2012. Is this good enough?

Definitely not, especially if you look at the additional investments ATM deployers have to make. A lot of regulatory guidelines have come from the Ministry of Home Affairs (MHA) and the Reserve Bank of India--like on security guidelines and cassette swaps. All of these have added to costs for deployers. So, to be honest, I don't think the Rs 17 price-point (for the interchange) is valid from that point of view. Because unless and until you get on an average, of say, about 140-250 transactions on an ATM, you will not be able to break at the price-point that’s being paid today. On an average, I think our costs today are in excess of Rs 20 because the national average for transactions is just at about 120-225 for an ATM. That's why a lot of private deployers are not very excited about going out and deploying ATMs on behalf of banks, whose transactions per day are very, very low. We would be happy to do it, you know, on a fixed-fee model rather than a transaction model because at the current interchange, we don't make any money.

If the ATM channel isn't ready to absorb costs, given the recently introduced UPI-ATM linkage, won't cash (deployment) charges go up?

I think the initiative from the National Payments Corporation of India is welcome as you can do cardless UPI transactions on the ATM channel. Whike we have not yet seen it happening in large numbers, I am pretty sure we would all be looking forward to this happening. Currently, only a few banks have started enabling UPI-cardless transactions on their ATMs. In the current context, with costs having gone up from a regulatory perspective--following the MHA guidelines and cassette swaps--it doesn’t make commercial sense at Rs 17 (interchange). Definitely, it’s a challenge. It's an uphill task for deployers; it's so even for banks.

Do you see a noticeable shift to recyclers coming up, given the cost-benefits to be had?

Yes. Today, we have 50,000 recyclers in the country, and most have got deployed in the branches. There’s a good business case for deploying recyclers in branches, as you can move cash from the teller to self-service technology, and you can offer it 24x7. However, in offsite locations, the business case doesn't stack up. The interoperability of these 50,000 recyclers is not operational yet. So, there are some challenges currently, and we have not seen the numbers really going up.

What will the shape of the ATM channel be, going ahead?

I think what we're going to be seeing is that a lot of banks are going to come to service providers like NCR Corporation and tell them, 'we want you to run our ATM network for us’. The other trend we are seeing is -- what more can we do with the ATM itself? You have products which are not only just cash-deposits or withdrawals, but you can encash a cheque, do your e-KYC, and get a statement printed out. You will be able to do almost 80-90 per cent of what you would be doing in a branch. And with banks rationalising their branch presence, they would look at this kind of technology. Which would also help them redeploy their resources in their branches to do more cross-sell and up-sell more products and services.