Six years after demonetisation, deployment of ATMs set for biggest spike

Six years after demonetisation, deployment of automated teller machines (ATMs) is set for its biggest spike.

Request-for-proposals (RFPs) floated by banks show an order book for 17,000 ATMs to date in the current fiscal year (FY23), which had also sought interest for the upkeep of another 45,271 units. The order book (as of November 10) includes recyclers (machines in which you can deposit and withdraw cash).

This latter aspect is a clear indicator that deployers of ATMs are seeking to reduce their cash-loading costs even as the channel itself gets a new lease of life — reimagined, of course. Recyclers are costlier at Rs 600,000 a unit, compared with the ubiquitous cash-dispensers priced closer to Rs 350,000.

Orders for new ATMs amount to 6.53 per cent of the current installed ATM base, and more demand is seen flowing in, with four months still to go before FY23 comes to a close.

“We will continue to remain focused on creating one of the largest integrated omni-channel payment platforms by providing innovative digital and cash payment solutions to our clients across sectors,” says Ravi B Goyal, Chairman and managing director, AGS Transact Technologies. “Going by the RFPs already floated in the market and those in the pipeline, the ATM network in the country is on a growth path.” He hopes the orders “will start coming on stream from the next quarter onwards and will be rolled out over the next 12 months.”

The buoyancy in ATM orders comes even as Unified Payments Interface (UPI) transactions hit a new high in September — in terms of both volume and value of transactions. According to the latest data released by the National Payments Corporation of India, the UPI platform recorded 6.8 billion transactions in September, amounting to Rs 11.17 trillion.

It’s up 3.05 per cent and 4.06 per cent in volume and value terms respectively, on a month-on-month basis. On a year-on-year basis, volume of transactions was up 85.55 per cent and value went up 70.61 per cent.

ATM deployments had hovered between 225,000 and 235,500 units, before sniffing the 260,000-mark recently. This is still far short of the forecast by the London-based Retail Banking Review — the gold standard for the trade — of 400,000 ATMs set for 2020. China, incidentally, has over a million ATMs.

Other than the emergence of digital modes of payments, the decision to merge four sets of state-run banks in August 2019 had led to a rationalisation of branches and ATM networks of the banks involved.

The banks involved were: Punjab National Bank (PNB), Oriental Bank of Commerce (OBC), and United Bank of India (United Bank); Canara Bank and Syndicate Bank; Union Bank of India, Andhra Bank, and Corporation Bank; and Indian Bank with Allahabad Bank. It marked the biggest such move anywhere in the world. And more importantly, the move had rearranged 25 per cent of systemic banking assets in a single shot.

“We have close to around 258,000 ATMs, and are seeing an uptick in deployments. It’s largely coming from white-label deployers and a few state-run banks that have come out of their rationalisation mode — because of the mergers and acquisitions which have happened. So, rationalisation has taken place of branches and the ATM network,” says Navroze Dastur, regional vice-president (Asia Pacific) and managing director (India) of NCR Corporation — the world’s largest manufacturer of ATMs.

The move in June to hike the inter-change to Rs 17 (from Rs 15) for financial transactions and Rs 6 (Rs 5) on non-financial transactions came as a breather. Yet, the hike in interchange on cash pull-outs is lower than the Rs 18 set as far back as 2012. An internal study by the Reserve Bank of India pegged the average cost of transactions at between Rs 15.60 and Rs 16.70 (assuming 120 swipes in a day at ATMs) and at between Rs 14.50 and Rs 15.40 (assuming 130 swipes a day).

“Even if it (interchange) had been upped to Rs 18, it will only be a restoration to the earlier level. To be meaningful, it has to cover operating costs,” says a leading industry voice.

All this, even as the better part of the post-demonetisation years was taken up in recalibrating ATMs, and reworking vendor agreements with managed service providers (MSPs) and cash-in-transit.

Industry sources now hope to leverage the ATM channel so that it almost mimics bank branches. And that’s why leading ATM vendors — NCR Corporation, Diebold Nixdorf, and Nautilus Hyosung — are now turning out machines capable of offering almost everything that can be done at branches.