Interchange of Rs 15 makes ATM channel unviable: NCR India's Navroze Dastur

Deployers of automated teller machines (ATMs) are burdened by the challenges posed by digital modes of payments, high operating and compliance costs. NCR Corporation, the world’s largest vendor of ATMs, has over 50 per cent share of the local market, but business could be better, says NAVROZE DASTUR, managing director, NCR India, in an interview with Raghu Mohan. Edited excerpts:

The number of deployed ATMs has plateaued at around 235,000 over the past few years. As a vendor, how do you view this situation? 

We saw exponential growth in ATMs during 2013-14. Most of these ATMs have reached the end of their lifecycles. Banks are looking at upgrading them on security features, and adding more dynamic and multi-function features like recyclers, near-field communication, biometric and making them interactive. This is one of the main reasons that the number of ATMs deployed has remained at near-constant levels of 235,000.

But are banks fully leveraging their existing ATM network as of now?

ATMs are mostly being used for cash withdrawals and mini-statements by customers. Both banks and customers can do much more with ATMs. The more tech-savvy banks like HDFC Bank and Axis Bank use their ATMs to do target-marketing to their own customers — loan products, or credit card offers — even as they target other banks’ customers. Some banks are reluctant to offer others services other than cash, as they don’t want customers to queue up at ATMs. And there’s a reason for this. 

You see, because you’re under-penetrated as a country at about 125 ATMs per million, compared to 350 in China, or 1,200-1,500 in the United States, what happens if queues were to start forming outside ATMs? Your customers will then move on to the next available ATM. So, you will lose the revenue opportunity and end up paying (by way of inter-change) for that customer who has gone to another bank’s ATM. When the ATM density reaches a sizeable number and there are no big queues, you will then be able to offer more services. Today, there are about 20 types of transactions on offer (on ATMs), but how many customers use them?

Just how long do you think deployers can work with an interchange of Rs 15?

Almost every deployer is struggling to make a business case at the current interchange of Rs 15. The cost of running and maintaining a 24x7 channel with all the regulatory mandates from the Reserve Bank of India (RBI), and ministry of home affairs on cash handling is increasing by the day, making it a non-viable business. This is one of the main reasons why we are not seeing new white-label players coming in despite the RBI’s on-tap licensing policy.

Do you see a shift to cash recyclers, given the cost benefits?

Yes, but 95 per cent of the deployed 35,000-odd such units are in branches, as it makes sense to migrate transactions from the teller to a self-service 24x7 channel. Off-site deployment is where the true cost-benefit analysis has yet to establish itself.

Why are wall-mounted ATMs not in vogue in India despite the lower operational costs involved?

From a serviceability point of view, “through-the wall” ATMs are better, as maintenance and cash-loading is done from the rear in a more secure environment. Some banks have started such deployments, but it has not taken off in a big way because of the slightly higher cost, or the lack of availability of these units from all manufactures.

ATMs are rooted in the casheconomy. How are digital payments going to impact this channel?

Digital payments have been growing very rapidly and their acceptance has increased, especially during demonetisation and the pandemic. Many people have been predicting the death of cash now for some time. But in markets like India and other Asian countries, cash accounts for 80 per cent of the transactions in volume and value. We have seen cash bouncing back after temporary setbacks. Even today, though digital transactions have been growing phenomenally, the cash-in-circulation is back to its pre-Covid levels.

In India, seven out of ten people don’t have access to digital forms of payment, especially in the rural areas. So, how do you plan to serve this large segment? Peoples’ comfort and acceptability of this mode of payment (cash) is so strong that they are reluctant to let go of it. I strongly feel that both digital and cash transactions will continue for a long time. Digital adoption will increase as long as they can ensure safety, security and quick redress to disputed transactions. 

That said, the new-generation self-service ATMs are now capable of offering almost everything that a branch can — be it depositing cash or cheques, cashing a bearer cheque, getting a statement of accounts, your e-KYC,as well as cross-selling financial products like loans, mutual funds, insurance, paying your bills, etc. The new-generation ATM introduced by NCR, called an “interactive teller”, is a bank-in-a-box.