Introduction of ATM in the banking industry sector can be demarcated as a major milestone in its evolution. The ATM was started by Barclays Bank in Britain in June 1967. In India, HSBC had introduced the first ATM in Kolkata in 1987. At that time, all the ATMs were standalone.
Deposit cash in Cash Deposit Machine (CDM) & withdrawing the cash through ATM& CDM are the most important features of ATMs/CDMs. Besides, other non-financial transaction like bill payment, account inquiry, mini statement, mobile recharge, payment of credit card etc. are being done by the help of ATMs.
The ATM technology has developed to such an extent that some ATMs can memorize consumer preferences as per their past transactions, behaviour, and tailor services accordingly. In several cases, ATMs have internet scope which facilitates two-way communications with live agents, provide biometric options, and have the ability to demonstrate personalized advertisements. Maintenance of web enabled ATMs are easy. These ATMs can be swiftly connected to central monitoring system of vendors.
There is tremendous opportunity for growth of ATM market here. It is a place with 1.3 billion people, where 40% of them are unbanked. Though it is growing fast, there are many challenges associated with security issues of the software, surge of rental costs in major cities, housekeeping and replenishment of cash.
|All Banks||Sept 2019||Jan 2019||Jan 2018||Jan 2017||Jan 2012|
|Debit Card (Nos. in Cr.)||83.56||92.34||84.67
|Debit Cards (No. of Transactions in ATM)(nos. in Cr)||79.40||88.05
|Debit Cards (Amount of transactions in ATM)(Rs. In Cr)||2,73,786||2,66,124
The above data shows that there was a time when ATMs were opened day in day out by all the banks, from 2012 to 2017 there was more than 100% increase in no. of ATMs installed as well as no. of ATM card issued and no. of debit card transactions. But after demonetisation in the last quarter of 2016, increase in the no. of ATM has come to a halt and in last two years it is on declining trend.
|All Banks||Sept 2019||Sept 2018||Sept 2017||Sept 2016||Sept 2015|
|POS Txns. (Nos. in Cr.)||59.44||50.09||37.90||20.31||15.23|
|Mobile Banking Txns. (Nos. in Cr.)||110.76||48.96||11.39||7.26||2.71|
While the growth of ATM has come to a standstill at present, POS and Mobile Banking transactions have been registering huge growth.The trend shows that people are showing more interest in digital transaction.
High maintenance cost–Interchange fee is the fee that banks pay each other for the use of their ATMs by other banks’ customers. This is currently fixed at ₹15 per cash transaction and ₹5 for a non-cash transaction and has not been revised since 2012. The cost of transaction on ATM works out to be Rs 23 for a 150 hits/day ATM.
After recent RBI guidelines on ATMs, maintenance and transactions on channels will become costlier. RBI has advised that banks may consider using lockable cassettes in their ATMs. Also, banks have to upgrade all the ATMs with supported versions of operating system and to implement anti-skimming and whitelisting solution. These guidelines will demand a sizeable investment that may account for up to 40% of the cost of ATM machine.
The Confederation of ATM Industry (CATMi) said that new rules issued by the government and the Reserve Bank of India (RBI) would hike the cost of running an ATM making it an unviable business. They have also warned that half of the ATM machines in the Country might face closure in near future if some corrective measures are not taken.
In the light of above circumstances; ATM industry is going to face tremendous challenge in near future.
Challenges and Threats
- RBI Guidelines-Regulatory and compliance issues play a key role in business and technology strategies of financial institutions, as the end goal of the compliance regulations is to manage and mitigate risks since security at the ATM has become one of the major challenges as the threats are becoming more diverse in nature than ever before. To mitigate risk in ATMs RBI came with following notifications-
- Cassette – Swaps in ATMs-To mitigate risks involved in open cash replenishment/ top-up, it is advised that banks may consider using lockable cassettes in their ATMs. This may be enforced in a phased manner covering at least one third ATMs operated by the banks each year, such that all ATMs achieve cassette swap by March 31, 2021.
- Control measures for ATMs- Implement security measures such as BIOS password, disabling USB ports, disabling auto-run facility, applying the latest patches of operating system and other software, terminal security solution, time-based admin access, etc.
- Implement anti-skimming and whitelisting solution.
- Upgrade all the ATMs with supported versions of software. Such upgrades shall be during phased manner to make ensure that in respect of the prevailing ATMs running on unsupported versions of software.
Huge expenditure will have to be incurred to implement the said measures by ATM operators. This will affect their profitability and visible gain will be negligible. But keeping in view of the recent security breach in many of the ATMs, implementation of the above measures is essential.
- ATM Security– ATM related fraud has become a worldwide issue affecting financial institutions along with its customers. Banks need to assess their fraud prevention capabilities to detect gaps needed to be filled and to attempt to get one step ahead of the fraudsters. ATM skimming remains a prime concern. Leading vendors have developed anti-skimming devices to alleviate the risk due to ATM skimming and to extend the lifespan of existing ATMs.
- OS (Operating System) Upgrade- Microsoft is contemplating to terminate the support for previous versions of windows operating systems. Windows 10 is the latest operating system offering various features related to security. Banks have to plan to migrate their ATMs since it may require additional cost in terms of money, effort and time.
- EMV compliant– As EMV (Europay, Mastercard and Visa) proved to mitigate card fraud by card skimming, many of the cardholders and merchants are adopting EMV technology to mitigate the risk. Majority of the POS terminals have implemented EMV but ATM industry adoption of EMV is slightly behind the target. As majority of the cards are EMV enabled, financial institutions need to understand that if ATMS arenot EMV compliant, they can be held liable for any fraud happening when EMV enabled cardholder does a transaction at the ATM.
- Cash replenishment and uptime- With augmented focus on customer enablement, the service level agreements (SLAs) between the bank and the ATM serviceprovider or the ATM service provider and the CRA (cashreplenishmentagencies) provide for minimum level of uptime, which should be maintained.If the uptime is less than the level as provided by the SLA, there are penalties imposed by the bank from the ATMservice provider. Therefore, with evolving technology, ATM providers will have hugeresponsibility of maintaining uptime level as well as have such controls in place, which guarantee that the penalties charged bybanks are in line with agreed terms& conditions as per the SLA and these penalties are recovered from respective vendors or CRAs.
- Data collection and implementation- Today, data is a real wealth and it is being said that whoever acquires and controlsthe data will have hegemony in the future. The global movement of data is creating hugeprospects as well as challenges. But the implementation of systems andsuch procedures, which capture the data, record and maintain it in order to facilitatethe flow and processing into useful information is an uphill task. The collection ofprimary or secondary data needs both thorough understanding of the informationrequirement and the adequate processes, which process such data intoinformation.
- Wallets and digital payments- The Government is moving fast towards its plan of making the economy cashless through digitisation ofpayments and evolution of e-wallets for making various payments. Hence, it can be observed that making payments at POS is increasing at a much faster pace as compared to ATM transactions.
People have started making payments directly by using debit or credit cards rather than withdrawing cash from ATMs and making payments in cash.Various modes such as net banking, phone banking, e-wallets, etc., are slowly growing their operations in India. The comfort of operations, as well as benefit of mobility and various benefits offered by sellers or vendors or government for making payments digitally have started appealing users, who till date, have believed in a cash-driven economy. The RBI, in its master directions for prepaid payment instruments (PPIs), had proposed the idea of interoperability among digital wallets, following which digital wallets present in the ecosystem will be able to interact or transact with each other. Interoperability will leta user of one e-wallet to make payment to another e-wallet. With this customer facilitation will be increased due to the ease of making such payments. This poses threat to the ATM industry in the long run.
- Cryptocurrency- With the concept of cryptocurrency gaining more and more relevance globally, in the long run India cannot be expected to remain backward in this domain. Therefore, till the time when the cryptocurrencies in India are given legal status, it is going to be a challenge for ATM service providers to develop technologies for payments in cryptocurrency. It will also be a challenge for ATM service providers to facilitate cryptocurrency through ATMs and remain pertinent in the market.
Based on the empirical data available related to ATM, Debit card issued, Debit card transactions, other digital transactions and feedback received, it is evident that ATM industry has reached to saturation and either become static or started declining. This is mainly due to increased cost in maintenance of ATM and more emphasis being given on less cash/cashless economy worldwide.
On the other hand, in our country ATMsare not going to be phased out in the near future as compared to some of the developed countries. It will evolve and take a new dimension.Keeping in view the huge amount involved in maintenance and further implanting latest security measures, there is need for cost-benefit analysis of each ATM. There is also need for rationalising of ATM installed, if needed closing some of them and/or shifting to a place which may be most suitable.
Some of the suggestive measures which may help in giving new dimension to ATM Industry are as below-
- ATM should be equipped with Next Gen digital banking products/apps/services to reduce the cost and drive people towards Cash Less banking. In future, ATM machines will not only be dispensing cash instead they will work as Kiosk where various Digital products/services get delivered to customers without branch intervention.
- Door delivery of sealed packets of cash- Devise model for delivery of cash through online delivery aggregators such as Big Basket, Swiggy An app may be developed that authenticates the delivery to the right customer. This may be implemented in metro and urban cities with identified locations and with certain limit of cash taking a view of the security aspects.
- Round the clock ATMs may be made available only at bus station, railway station /police station / prominent hospitals etc. This will help in reducing operating cost.
- The replenishment of cash at all ATMs has to be done by a separate wing unrelated to the branches, so that branch banking doesn’t get adversely affected.
- All standal oneATMs need to be upgraded to Recyclers. E-Lobby is also sharing the burden of non-cash transactions being done on ATMs. In future, ATMs may replace the entire banking services including cash transactions, passbook printing, issue of inter-office instruments, submission of life certificates by pensioners, inquiry on products (selecting the products and obtaining details by SMS or e-Mail, Debit mandate registration, many more services, which are otherwise available on net banking may also be made available at ATMs).
- Cash flow is an integral part of an Indian economy. Making less cash or cashless economy not only requires customer education but also require robust infrastructure and secure IT channel which involve a lot of CAPEX. Some investment in ATM industry along with infra upgrade will give much better results. The current machines must be upgraded or replaced with mini-kiosk branch functions (deposit,withdraw, cheques clearing, ECS/SI mandate, raising transaction related complaints, etc.)
- Customers should be inculcated to go to alternate channels, India being cash transaction vested economy, people rush to bank and ATM. Mobile ATM should be increased. To discourage ATM transaction,ATM charges should be reviewed. ATM card should be issued after viewing customer’s transactions at least for three months. Minimum balance norms should be brought for issuance of ATM card.
- Less space occupying (may be embedded on side of buildings, with access from inside building, incurring less maintenance cost).
- ATM industry is not having much room for expansion unless the drastic change in technology. Updated machines with solutions to note jam and wider acceptance of notes on recycler along with functionality where customers can give preference for cross sell or up sell of various products offered to them based on their records. Some technological innovations like biometric authentication for ATM cash withdrawals to avoid ATM cloning and other related frauds, are need of the hour.
- EMV Adoption– Until and unless EMV is adopted at all ATMs owned by financial Institutions, ATMs would be more vulnerable to fraud attacks which puts the security of customers’ data at risk.
- Mobile Integration– ATM needs to get smarter by integrating latest technologies available in the market like NFC or QR code etc. to be able to provide better banking experience for smartphone users at their ATMs and to mitigate risk due to various fraud techniques like card skimming and card trapping. ATM-mobile integration offers financial institutions significant amount of opportunities to enhance customer experience by offering services like including the ability to store transaction preferences, mobile card-less ATM access, faster completion of transactions to be on par with digitalisation and market changes in physical channels.
- ATM Data Analytics– With the latest technological innovations and sophisticationat the ATMs, ATMs facilitate customers to perform wide range of transactions which were typically handled by traditional branch representatives. Thus, there has been a noteworthy increase in the customers choosing for self-service channel which led to the necessity for data analytics in ATM industry to recognize customers’ preferences and behaviour and to achieve operationalefficiencies in areas like demand forecasting and cash management. Bank can deploy advanced data-based models and data driven decisions, to produce a wide range of customised statistics and increased customer satisfaction.
- Video Banking– Using Interactive Teller Machines(ITM) customers can perform 95% of the activities performed by the branch through real time communication with remote teller generally situated in call centre. It will help the bank to add value to its customers by providing extended access to banking services and financial experts to its customers.
- ATM Branding– This facilitates increase in transactions and helps to generate new opportunities by gaining customer attention and ATMs present profitable opportunities to promote brand awareness. In the traditional form of ATM branding, and ATM operated by and independent ATM Deployer builds a partnership with a financial institution (FI), in which the ATM bears the name, logoand graphics of the financial institution. Through this, a financial institution can offer surcharge free transaction to its customers thus boosting customer loyalty and helps in generating new opportunities.
- Distributed Ledger Technology (DLT) – This technology is described as a ledger that is maintained by banks via nodes in a decentralised form across multiple locations, various transaction and multiple individuals.All the information is then stored and utilised by multiple banks within the nodal network that use these transaction and history of account to assess the credibility of the account or individual.This attributes enhanced safety and security for transactions related to such technologies, which may not only transform the usage of traditional ATMs but also obliterate the use of cards.
- Varying bill denominations- With the fixed denominations dispensed in cash form, many banks have enabled their ATMs to dispense cash to the exact change requirement and provided additional flexibility to the customer when it comes to their cash withdrawals.
- Solar-powered ATMs- ATMs in urban areas consume substantial amount of electricity. However, in rural areas the Government is introducing ATMs which will run on solar energy enabling the banks to provide services in those areas where there is shortage of power.
The landscape of the Indian economy is changing, on account of numerous economical, technological and regulatory reforms which in turn are affecting the ATM industry. However, in the long run, to alleviate the effects of changingscenario, strong and effective external risk management along with enterprise risk evaluation is essential,which will not only enable the business to sustain in the market but will also attain the objective of better customer facilitation. Unless the change is incorporated by the industry and its elements, which apparently requires strategic management and innovation, the industry may find it difficult to sell secure services to customers.