On a Fast Track

Notwithstanding the RBI guideline that made balance enquiry and cash
withdrawals from any ATM free of charge irrespective of the bank, it has been
another year of steady growth for ATMs in India. In terms of number of units,
there was a net addition of 9,300 machines during the fiscal, which translated
into 40% growth in units, taking the total ATM base in the country to 34,500 in
FY 08, says a Frost & Sullivan report on ATMs in India.

Catching Up

Though currently the ATM penetration level in India is lower as compared to
other Asian giants like China, Korea, and Russia, it is expected to reach
fifty-six ATMs per million by 2010, quotes the Frost & Sullivan report from the
twenty-six ATMs per million today. China has fifty-five ATMs per million and
South Korea leads with a density as high as 1,600 ATMs per million.

Revenue-wise, the market jumped to an estimated Rs 699 crore. However, this
involved only the ATM equipment and the annual maintenance contracts (AMC)
services. There was an entirely different services market around ATMs (cash
dispensing, security, cash management, call center, etc) that continued to
contribute a little more than the market for ATM machines itself. (This market
is though not included by DQ for computational purposes). The services market
grew by just over 37% over FY 07, while the products (ATM machines) share grew
much faster by over 50% .

NCRs key customers include State Bank of India, HDFC Bank, Punjab National Bank and HSBC among others. Axis Bank, Syndicate Bank, and PNB are few of Diebolds largest clients. Tech innovations were on the rise too: NCR got into a strategic allance with Symstream Technology to introduce wireless connectivity solutions for ATMs. It had pilot deployments of a few biometric ATMs too. Diebold, on the other hand, looked at bringing in deposit automation, viz, depositing cheques directly in the ATMs

A report published by Celent predicts that the best is yet to come. The next
three to five years will see even higher growth of ATMs in India. The report
foresees high growth in innovative technologies such as biometric ATMs that
cater to the rural population.

ATM Action

Currently, India is an oligopolistic market with three dominant playersNCR,
Diebold, and Wincor Nixdorfhaving a major influence in the market. All the
three equipment vendors are also service providers. NCR continued to be the
market leader with close to 50% market share, followed by Diebold at 44% and
Wincor at 6%.

According to Frost & Sullivans Sourabh Kaushal, principal consultant, ICT
Practice, South Asia & Middle East, while unit-wise the share of NCR came down a
bit, the others grew faster. Despite odds, NCR did manage to secure the
countrys largest order for 3,000 ATMs from State Bank of India. It also
recently announced the successful completion of its pilot project for Cheque
Truncation System (CTS) in Delhi for the Reserve Bank of India (RBI). According
to industry estimates, with over 1.3 bn cheques being processed annually, India
boasts of the largest cheque truncation project in Asia.

NCR also secured the second largest order of 1,000 ATM from Canara Bank,
while also installing an e-ticketing kiosk and portable ATM Center at the Egmore
Railway Station in Chennai for the Indian Bank.

NCRs key customers include SBI, HDFC, PNB and HSBC among many others. NCR is
right now in the process of piloting and deploying biometric ATMs for some
public and private sector banks in India. Another Chennai-based small vendor,
Financial Software and Systems had last year announced the launch of its
Biometric ATM Interface Solution (BAIS).

Diebold too looked at bringing in newer technologies, specifically, deposit
automation. The company is expected to enable cheques being deposited directly
into the machine. Axis Bank, Syndicate Bank, and PNB are few of Diebolds
largest clients.

While the vendors are already gearing up with advanced technologies, banks
too seemed to be looking ahead in upgrading network. During the fiscal, HDFC
Bank set up close to 250 offsite ATMs.

The Road Ahead

The ever growing requirement of convenience and speed and a corresponding
culture of customer focus have been forcing banks to identify and deploy
innovative channel avenues to ensure customer retention and growth.

Another trend one sees is that banks have been proactively looking at
focusing on their core business and outsourcing management of ATMs to service
providers. It is becoming a preferred norm, with banks not wanting to spend
in-house resources on day-to-day operational management of its ATM network.
Primarily, limited outsourcing and end-to-end are two most popular in India.
End-to-end makes up for about 40% of the market at present, and is done mostly
by private banks.

The ATM market is likely to go beyond cash dispensing and balance checking to
more advanced self-service functions such as bill payment, ticket bookings, pass
book updates, DVD rentals, and third party product marketing, etc. Also, while
at present, the penetration of ATMs is significantly higher in tier-1 cities
than tier-2, equipment vendors have started to see deployment of the
self-service channels, better suited to meet specific needs and challenges of
the rural environment enabled by Biometrics. Looks like the cash revolution
will touch rural India soon.

Urvashi Kaul

urvashik@cybermedia.co.in