As the country struggles with cashless ATMs, ATM service providers seek higher interchange rates to meet the incremental cost of the recent RBI regulations. The ATM industry is no longer viable and most players are already incurring losses, said leading ATM players.
“The lower interchange has created a situation where it is better for banks that their customers go to another bank’s or ATM operator’s ATM to withdraw cash,” said Sanjeev Patel, chief executive officer, Tata Communication Payment Solutions. He added that the issuing banks need to bear the incremental cost of additional regulatory requirements as it is cost of customer acquisition for them.
“Our interchange is decided by a committee set up the National Payments Council of India, which itself is not in consensus,” said Himanshu Pujara, managing director (MD), Euronet Services India. Interchange is the rate charged by ATM operators for every transaction, which is currently at Rs 15 per transaction, reduced from Rs 18 earlier.
The confederation of ATM Industry (CATMi) has been in talks with the regulators to raise interchange for the past three to four years.
“It is an economics issue. The issuing banks, mostly comprising of big and public banks, do not want to pay a high interchange rate and they put pressure to keep the interchange low,” said Pujara.
The recent RBI circular deems that the service providers for cash management related activities should have a minimum fleet size of 300 specifically fabricated cash vans, with two custodians and two armed security guards, besides the driver. Another circular said that ATMs should transition to lockable cassettes from the traditional top-up method.
“Added costs of cash management will make the operations unviable for bank ATM operators and white label ATM operators and will force the closure of several ATMs,” said K Srinivas, MD, BTI Payments.
“The new regulations could potentially double the cost of carrying cash. Rural areas would be hit the worst as ATM operators would close their ATMs in those areas first,” said Patel.
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