‘White Labeled ATMs’ may soon be part of Indian Banking Sector!


Despite the stupendous growth of banking sector in India in the last 10 years and the development of a highly competitive marketplace comprised of both domestic and foreign based banking entities in India, access to various banking services in India continues to remain a major problem.

The access to banking is specially troublesome in rural and remote areas around the country. To get a sense of one key branchless penetration of banking- ATMs, sample this piece of information…

China had 21,0000 ATMs by the end of 2009, USA had approximately 42,0000 ATMs by the end of 2009. India on the other hand had 75,000 ATMs by the end of June, 2011

It seems fair to compare the number of ATMs in India with the likes of China and USA despite the fact that these two countries probably had a much better banking system in place. But, if the growth of India is often benchmarked against these very countries it is evident that the state of ATMs in India does not cut a very happy picture.

The answer to fast nationwide expansion of ATMs is ‘White Labeled ATMs’ as demonstrated by other countries like Canada which has seen tremendous boost after allowing for White Labeled ATMs to be opened. In basic terms, a white-labeled ATM is not a property of the bank and rather owned and maintained by a private third-party. This is different than the current model wherein the banks have to bear the cost of buying the ATM machines and also handle the cash management.

It is noteworthy that RBI has been dilly-dallying the decision to allow White Labeled ATMs in India since 2006 but for some reason, it is yet to become a reality. However, things might be looking up in this regard if IDBI Bank is considered.

Apparently, IDBI is planning a joint venture with a third-party company in order to get into the White Labeled ATM space.

Even though technology seems to be a constraint since White Labeled ATMs will require a standardization of banking processes by various banks the potential white labeled ATMs could have is immense. It can create a new financial services segment itself totally controlled and managed by non-banking entities.

With the current model, banks have to bear upfront costs as well as recurring expenses to maintain ATMs and this might restrict them to expand the number of ATMs especially in remote locations where these banks may not even get enough transactions.

However, since a White Labeled ATM is not tied to a single bank, a third party operator might be in a better position to bear a return on the investment since the business model will involve charging a fee on every transaction irrespective of which bank the ATM card belongs to.

The additional charges levied by white labeled ATMs could be detrimental to the fast adoption of these kind of ATMs but I am of the opinion that customers of today might be ready to shell out a small fee for the convenience of finding an ATM close by and withdrawing/depositing cash irrespective of the bank they have an account with.

What are your thoughts on the concept of White Labeled ATMs and their potential to take banking to even the remotest places in India?

  1. Bolesh Ahuja says

    the use of atm we get the great information about the use of atm in the bank now with the popularity of increase the standard of people of living also increasing so in banking sector giving more facalities to us

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  4. Prateek Praveen says

    This is a great piece of information. If White Labeled ATM’s becomes the reality then it would surely be a big boost to our fiscal policies particularly aiming at fiscal consolidation.

  5. Altaf Rahman says

    Its not only transaction fee which factors in while people are using ATMs. Let me give you my example. I have a/c with HDFC, my wife has an a/c in SBI, my dad has an a/c in Bank of Baroda, my bro has an a/c in Canara bank. The ATM nearest to our house is Andhra bank. We all know that after few withdrawls in a month (I dont remember the exact number) we are charged some fee for using other bank’s ATM. In order to avoid additional charges, we travel approximately 2 km to the bank ATM. Its not only travel. We are using fuel (casuing pollution) we are using already swollen roads (causing traffic congestion).
    Suppose a white ATM is near our location. An additional fee will not deter us from using the machine. Its conveniance that matters. No matter, Indians are getting used to paying a small additional fee for conveniance (unless it amounts to a major portion of income).

    1. Ankit Agarwal says

      True and i mentioned the same in the article as well. People tend to pay for convenience. However, in my mind i was trying to extend the idea to the rural sector. Imagine white-labelled ATMs set up in villages making it easier for farmers, SHG working ladies to manage their earnings/savings safely. Also, folks with extra space could lend it out for these ATMs and get some revenue from private operators. The tx. fee in this case could be huge detterent. I wonder if private ATM operators could instead work out alternative models like advertising, lead-generation etc. to make up for revenues and relax the fee in villages :-)

  6. Altaf Rahman says

    This is comparable to Tower Infrastructure business related to telcom sector. Though telcom companies can not operate with out towers, in order to optimize the finances, they depend on third party towers (though some of them own part of towers like Relcom etc but they prefer to make the tower business a seperate entity).

    Similarly white ATMs offer a new business model. As the private companies which compete in this sector wish to provide superior services, they tie up with as many banks as possible while keeping service charges at the lowest.

    They also maintain the ATMs properly and rectify problems immediately as time lost due to machine down is revenue lost. Compare this with present bank ATMs which remain out of order for weeks on.

    RBI has to act fast. No doubt they do risk assessment from all angles. But they take examples of establised existing systems like the ones said above like in Canada.

    It will casue many new enterprenuers to enter this business and reduce congestion at ATMs. As the no of machines grow, the turnover goes up.

    A good article !!

    Just my two paisa :)

    1. Ankit Agarwal says

      Altaf, i like the analogy with the telecom tower model. However, the biggest challenge here is that white labeled ATMs in the current business model need to levy an additional fee on the customer wherein in the telecom tower analogy, customer is not directly taxed. Having said that, if the transaction fees can be kept low there is no doubt that banking penetration can increase multifold

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