With their sheer convenience and ease of use, ATMs (Automated Teller Machines) have today secured a comfortable place in the customers mindscape, which few other innovations can replace. Worldwide, ATMs have been the killer solution for the banking sector that has revolutionized the way transactions are carried out. Similarly, in India too, in the last couple of years ATMs have changed the face of banking services.

With the total number of ATMs deployed countrywide having reached close to 25,247 in FY 07, the industry has obviously been upbeat. Though an RBI guideline, directing offsite ATMs to get a specific license, did come as a dampener last year, the industry still managed a 19% growth, with close to 4,100 ATM deployments. In the next two years, the industry is expected to see the deployment of 40,000 ATMs.

SBI held on to its leadership position with 6,473 ATM deployments, way above ICICI Bank with 3,469 ATMs. During FY 07, while SBI deployed 2,000 units, ICICI deployed 300.

The year saw SBI on an expansion spree, announcing plans to launch 3,000 more ATMs. The deployment and maintenance contracts went to NCR for around Rs 150 crore, making it one of the largest ever in India. SBI has a tie-up with thirteen other banks for 9,200 ATM facilities. Typically, setting up an ATM machine requires an investment of to Rs 6 lakh, with 10% annual maintenance cost.

According to some estimates the total cash movement through ATMs across India was around Rs 70,000 crore last year. In terms of increase in transaction volumes, the growth is estimated to be close to 25% (FY 07). Clearly, industry watchers forecast a bright future for ATMs in India. The numbers are likely to see a further climb, as banks look for new solutions and functionalities.

While the ATM is a great service for customers, for the banks it means immense savings on the cost of operations. While a typical cash transaction carried out in a banks branch premise would cost Rs 40, that in an ATM will only cost Rs18translating into a cost saving of Rs 22 per transaction. Industry estimates are that for ATMs to be viable, at least 10,000 transactions a month or 300 a day should be the target.

No wonder that banks are looking at bringing in advanced technologies. As they go forward, multifunctional ATMs will hold the key in the immediate future. ATMs that are capable of offering e-commerce activities, interactive features, or identification of customers through fingerprints or eye scans, may not be a distant reality.

Password based transactions may become pass as equipment vendors work on automated methods for recognizing humans based on one or more physical or behavioral traits instead of passwords. The technology is expected to help penetration of ATMs in the rural areas across the country. Cheque Truncation Solution (CTS), which enables customers to deposit cheques and get credit within 24 hours at the ATM, and Bunch Note Acceptance (BNA) are some other innovations round the corner.

The Road Ahead
The estimated total market size of ATM products in India is close to Rs 350 crore, while the services revenue (AMC) is about Rs 500 crore. According to a new RBR report on Global ATM Market and Forecasts Till 2011, India, along with other BRIC countries, is likely to invest heavily in ATMs during this period.

According to the report, Asia-Pacifics 476,000 ATMs account for 31% of the 1.5 mn installed ATMs worldwide, as compared to North Americas 451,097 ATMs, which accounts for 29%, and Western Europes 329,000 ATMs, at 21.3%.

Currently, in India, all the three equipment vendors, NCR, Diebold, and Wincor are also providers of services. NCR is a market leader with about 50% market share, seconded by Diebold at 44% and Wincors at 6%. There are four major networks, of which Cashnet and NFS charge Rs 20 for a cash-withdrawal, while MITR and Cashtree charge Rs 18 and Rs 10 respectively.

While Cashnet is a private Network, which is run by Euronet India, NFS is run by IDBRT, Hyderabad, MITR by Punjab National Bank, and Cashtree by Bank of India.

Most banks today are proactively looking at focusing on their core business by outsourcing the management of the ATM to service providers. Outsourcing is becoming a preferred norm, with banks not wanting to spend in-house resources on day-to-day operational management of its ATM network.

At present, the penetration of ATMs is significantly higher in tier-1 towns than tier-2. Equipment vendors see deployment of the self-service channels, which are better suited to meet specific needs and challenges of the rural environment, as the key to go forward.

While ATMs have become an intrinsic part of the urban mindscape, the challenge lies in penetrating deeper into the rural areas across the country.

Urvashi Kaul
urvashik@cybermedia.co.in

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