Vortex Engineering, a company focused on developing sustainable products for rural India, decides to develop an ATM to meet this segment’s banking demands. The ATM is powered by solar energy consumes just 4 per cent of the total energy that is required by a conventional ATM to function. It has the capability to serve Indian villages — indicating an opportunity for over half a million ATMs across the country. Read how Vortex Engineering’s unique ATM can help deal with the problem of low banking penetration in the third of the five-part series from India Brand Equity Foundation’s Innovations from India: Harbingers of Change.
The delivery of financial services to all sections of society at an affordable cost has been an area of concern for governments around the world. Financial services include services such as credit, savings, and insurance. To date, banks have been considered the most preferred channel for providing financial services. However, the banking channel has its own limitations, especially in nations that have a large rural population and diverse geographical conditions. This results in a low concentration of banking systems in rural areas. Rural locations account for around 70 per cent of the total population of India, but have access to only 30 per cent of the total bank branches of the country.
The low penetration of formal banking systems has also resulted in the proliferation of several informal financial enterprises such as local money lenders. These informal financial enterprises lack the necessary rigour in their processes (such as risk management skills, market research capabilities, and so on) which could help safeguard the interests of both money lender and borrower. The lack of defined processes results in the creation of an inefficient financial system.
Challenges such as the high cost of setting up a new bank branch, low transaction volumes, and the inability of conventional ATMs to serve rural locations have hindered the proliferation of formal banking channels in rural India. These challenges compelled Indian banks to approach the Indian Institute of Technology, Madras to help them address the problem of low banking penetration.
IIT Madras worked in collaboration with Vortex Engineering to develop a low-cost and reliable solution that would address the concerns of the rural population. This solution took the form of a unique ATM meant exclusively for rural locations.
As Vortex began developing the new ATM, it arrived at the following list of requirements for it:
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- It needed to cost less than conventional ATMs.
- It needed to consume less energy.
- It needed to be independent of the air conditioned environment that conventional ATMs require.
- It needed to be able to dispense soiled notes, as the supply of fresh notes to rural areas is very limited.
A fresh, radical approach
Vortex adopted the bottom-up methodology for developing the ATM. Instead of trying to strip down a conventional ATM to make it cost less, Vortex decided to completely redesign key elements of the machine. Here’s a look at some of the most innovative features that were developed for the ATM:
Redesigned Cash Dispensing Machine (CDM). In conventional machines, cash is stacked in horizontal cassettes behind the machine. Notes (paper currency) are picked from the cassette and moved upwards by approximately a meter to the dispensing outlet. This process uses various electric motors, constant force, and a conveyor belt to execute the cash dispensing command.
To replace this technology, Vortex’s team developed a technology called ‘Gravity Assisted Friction Pick (GARP)’. Under this approach, cash is stacked in the upper half of the ATM machine. Notes are picked up from the bottom of the stack and moved approximately 10 cm downwards for dispensing.
Ability to process soiled notes. Currently, most ATM machines require fresh and crisp notes to provide a better service experience. Vortex’s team developed a technology called ‘Sheet Separation’, which means it is no longer essential for ATMs to use only fresh notes for dispensing cash.
Low power usage. Because of the conventional CDM system, ATM machines require a lot of power to dispense cash. The system also requires air conditioning, as it consists of a processor and operating system that consume a lot of energy. Generally, a conventional ATM requires around 2,500 watts of power per day (that is, about 700 watts for the ATM and another 1,800 watts for the air conditioners).
Redesigning the CDM helped Vortex to reduce power usage by 80 per cent. This was due to the absence of motors and a conveyor belt, which are required in conventional ATM machines to propel notes to the dispensing system. Moreover, the new machine uses an Atom processor and Linux operating system, which help in reducing the power usage further. It has a single computer, as opposed to the two computers required in conventional ATMs. Its low power consumption allows it to be operated with solar energy instead of conventional power supply.
The ATM also allows biometric authentication of users’ identities.
Huge energy savings, reduced cost
The potential impact of such an innovative product can be seen across a lot of parameters:
Energy savings: The new ATM does not require air conditioning. It is powered by solar energy, due to which it consumes less than 72 units per month. This is just 4 per cent of the total energy that is required by a conventional ATM to function, and indicates a saving of 1,728 units per month.
Lowered cost. The design changes have reduced the cost of the new model by a fourth of the cost of a conventional ATM machine, helping save at least Rs 1,20,000 per year.
Increased uptime. The ATM can operate in spite of power fluctuations and failures, as it has an inbuilt battery which provides four hours of backup.
Cleaner environment. This unique ATM will help reduce CO2 emissions by at least 18,500 kg per year.
Easy acceptance, widespread adoption
Vortex first deployed its machines to help the local administration pay the beneficiaries of the National Rural Employment Guarantee Scheme (NREGA). People were delighted with the transparency and accessibility of the system. As a result, they stopped withdrawing all the money that was due to them, preferring to save it in their accounts. As the people began saving, the bank found that it had an unexpected surplus of deposits. This was reported on the website of the Union Ministry of Rural Development.
The list of accomplishments doesn’t end here. Vortex Engineering has bagged an order from the State Bank of India for the deployment of 545 ATMs across India. The economic feasibility of such a product seems undeniable, as there are approximately 6,40,000 villages (as of 2005) in India which can enjoy the benefits offered by this unique product.
This product has become a point of focus not only in India, but also across other key emerging geographies, such as Africa, South East Asia, and so on. For instance, one of the African countries has an ATM penetration as low as 17.5 ATMs for every 1,00,000 people. Regions such as Sub Saharan Africa (SSA) have a banking penetration so low that only one in five households has access to formal banking services.
Therefore, this product has large potential in geographies such as Africa, which face infrastructure and fiscal constraints similar to India, helping them minimise cost while maximising energy efficiency. With the wide range of benefits it offers, Vortex’s new ATM is poised to revolutionise banking all over the world.
Reprinted with permission from IBEF (www.ibef.org). Next week, in the fourth part of the series, read the case study on SELCO India, a company that develops solar energy solutions for underserved households.