Bank looking to sell all its 4,200 ATMs to third-party service providers.
Axis Bank is looking to make some money out of machines that dish out cash.
The nation’s third-largest private sector bank is exploring options to monetise its 4,200 automatic teller machines (ATMs). It may sell all its machines to third-party service providers. For an upfront payment, the bank may allow vendors to collect fees from other banks to let their customers use the lender’s ATMs. This is called inter-change fee.
In effect, the bank will move its ATM assets off its balance sheet and outsource the management of the entire network to service providers, paying them on a per-transaction basis.
Request-for-proposals seeking solutions on how this can be accomplished have already been sent to eight to 10 vendors, including Wincor-Diebold, Prizm, AGS Infotech and NCR, according to a senior executive of one of the companies that has been approached.
The move comes months after Axis Bank struck the country’s largest ATM outsourcing deal, which could see it overtake ICICI Bank to have the second-largest ATM network in the country after State Bank of India (SBI).
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As part of the agreement, Axis Bank has signed contracts with Prizm Payment Services and AGS Infotech to set up and manage 5,000 ATMs on a purely variable model, enabling the bank to increase its ATM count to more than 9,000 within the next 18 months.
The idea to monetise assets that banks look upon as non-core is not new.
Last year, the country’s largest private sector lender, ICICI Bank, approached the Reserve Bank of India (RBI) for permission to hive off its ATM and point-of-sales (PoS) networks into joint ventures.
However, the regulator refused permission for hiving off ATMs, saying the responsibility for ATMs should remain with the bank. Subsequently, ICICI Bank hived off its PoS network into a joint venture with US-based First Data Corporation.
Axis Bank would continue to be responsible for its ATMs, the official said.
Axis Bank had 4,293 ATMs on March 31, 2010.
SBI has the largest ATM network in the country with 18,246 units as on December 31, 2009. ICICI Bank had 5,219 ATMs as on March 31. HDFC Bank’s ATM count is 4,232.
More and more banks are looking to avoid the expense and headache of setting up and managing ATMs by following the outsourcing model.
Last year, SBI entered into an agreement with C-Edge for outsourcing ATMs. Smaller banks such as YES Bank and Dhanlaxmi Bank have also adopted this model.
After RBI asked banks to stop charging customers for cash withdrawals, setting up and managing ATMs has become a costly affair for banks. Whenever a customer uses an ATM of another bank, his bank has to pay the bank whose ATM is used an interchange fee of about Rs 18.
In April last year, banks, following a directive from RBI, stopped charging even third-party customers for ATM withdrawals. However, in October last year, banks were permitted to charge customers who had used their quota of five free third-party transactions per month.