More and more banks plug into ATM chain

MUMBAI: Multilateral agreements between banks to share automated teller machines (ATMs) are being executed so fast all banks may be plugged into one other in the foreseeable future.

At which point, perhaps, we may herald the ‘White Brand’ age in Indian banking. But more of that later.

Today all banks in India have at least one bilateral agreement (sharing agreement with another bank), while more than 60% of the 23,000 ATMs in India are plugged into multilateral agreements (or accords between a group of banks).

“It will be safe to say that all banks will have multilateral agreements in the next couple of years,” said Loney Antony, managing director, Euronet India Services, which provides ATM vendor services to banks.

For banks it makes economic sense as it saves the cost of building an ATM. For customers, it means fewer complications as it saves the hassle of finding a particular ATM.

“The sharing concept is the future of banking. It helps smaller banks to give better customer service and also compete with the large ones such as ICICI and SBI who have far bigger ATM installations. It also saves them the cost of building an ATM, which is anything from Rs 5-6 lakhs upwards,” said V Babu, deputy general manager information technology, Bank of India.

A bank pays about Rs 20 to allow its customer use the ATM of another bank. Of this, Rs 16 goes to the bank from whose ATM the transaction has been done and Rs 4 goes to the ATM vendor.  The bank may choose to charge the full or a partial amount to the customer. In some cases banks choose to waive the charge fully depending on its position and strategy.

Bank of India has 350 ATMs and is involved in two ATM sharing groups — Cashtree and Bancs.

Cashtree is a network of more than 3,000 ATMs of 13 banks, mostly from the public sector, while Bancs is a network of 13 banks with 5,000 ATMs.

“ATM sharing has picked up in the last few years because banks have moved ahead from finding new customers to providing value-added services,” Antony said.

Noshir Kathok, country head, E-Funds, which provides ATM vendor service to Bank of India, Karnataka Bank, YES Bank and United Bank, says banks can also access a wider base of ATMs through shared networks on a pay-for-use basis. “It is a good option for both banks — high volume banks need more ATM centres, while low volumes need to attract more customers to use them,” he says.

ATM vendors like E-Funds and Euronet do everything from the interiors to the operations of ATMs. The only responsibility of banks is to provide the cash.

The vendors charge banks per transaction.

Vendors like us provide processing services to the banking industry to enable transactions across shared networks. For this, vendors receive a fee from the bank which varies between Rs 2 to Rs 5 per transaction.

“Banks are outsourcing on a large scale because they can reach individuals at lower costs and vendors like us are specialists in the job,” Kathok said.

As a natural progression of thinks, what comes after multilateral sharing?

The White Brand. These are independent, neutral ATMs not belonging to any bank at all. It’s a working concept in developed countries. Anyone can go to any White Brand ATM regardless of the card in hand.

“There is a lot of interest in moving towards a independent ATM but how long will it take till we reach that stage is a judgment call as it also includes regulatory approval,” Kathok said.

Antony is a bit more optimistic. “I think it will take a maximum of a couple of years for White Brand ATMs to come to India,” Antony said, adding that the cost of such a facility would depend on service provider and the charges would be per transactions.