Advisor-IT, IDBI Ltd "Several banks have consciously not built up their ATM networks. That doesn't mean they shouldn't pay those whose ATMs they use" Definitely yes! In fact, it has come at the right time as there is a growing need for creating a National Shared Payment Infrastructure to support the exponential spurt of electronic transactions, especially card-based ones. Like in many other countries, there is a need to have our own switching and shared payment network. With growing transaction volumes, per transaction cost is constantly coming down which encourages banks to move their customers to alternate channels. |
| On the other hand, there are banks that have consciously decided not to set up large ATM networks. As the sharing of ATMs benefits all the banks in widening their customer base and reach, banks with smaller networks may compensate those with large numbers of ATMs for using their infrastructure. |
| All banks, irrespective of their branch network, issue debit/ATM cards to customers and encourage them to use alternate channels like ATMs. This helps banks in increasing their reach in spite of small branch networks, reducing per-transaction costs and finally getting more customers without making huge investments. Now the point is whether banks should charge high interchange fees to customers for using other bank's ATMs when they, as part of business strategy, decided not to build their own infrastructure. That however, doesn't mean that these banks should not pay to those whose infrastructure is being used. |
| Over a period of time, we have witnessed that ATM/card-based transaction charges have come down drastically due to reduction in technology costs and increasing transaction volumes. Based on the past trend, per-transaction costs will further come down. So, whether to create its own network or use another bank's network on a cost basis will depend on a bank's business strategy. The whole idea behind encouraging customers to use alternate channels is to reduce the per-transaction costs. Charging them heavily for using the same is contradictory. On the contrary, there are banks that charge customers for using the branch channel. Why have a dual policy then? In an ideal situation a customer should be able to access any ATM installed in the country free of charge through an cooperative initiative by banks. |
| Moreover, the cost of setting up an ATM has come down, while transaction volumes have increased manifold which has reduced the per-transaction cost. Banks need to learn from the telecom industry where, with matured technology and large customer base, per-transaction costs have come down. This has helped customers in getting the same services at much lower affordable costs and the telecom operator in increasing revenues with much larger customer base and transaction volumes. Today, the cost per transaction has come down considerably. It is the right time to pass on the benefit to customers as the cost of servicing through the branch channel is much higher than ATMs. |
| The views expressed are personal |
Associate Director
(Financial Services),
PwC Pvt Ltd, India
"The reason ATM sharing hasn't taken off is the lack of clarity on the settlement of transactions and inter-bank fee structure"
The new bank licences issued after 1991 had three major expectations: a "reasonable" level of capital, best practices in banking, and better service through greater use of technology. The new banks brought in "anywhere banking" and a thrust on alternate delivery channels, that gave freedom to conduct banking away from the branch. These banks used ATMs as a "value-added" service and as a strong "visibility" statement. ATMs thus became a strong "customer retention" tool as the usage of ATMs was exclusive to the bank's customers and ATM-"heavy" banks offered usage to other banks at a stiff fee. Today, the ATM in India has become commoditised with costs of transactions on ATM being comparably much lesser.