White Label ATMs now !

February 22nd, 2012

Brown Label' ATM: Outsourcing of ATM services by banks. The ATM is named under the brand of the sponsor bank but the ATM machine is not owned by the bank. In such cases, the hardware as well as lease is under the ownership of the service provider, while connectivity and cash handling and management is the responsibility of the sponsor bank White label ATM: These are ATMs which are not owned by banks but by private ATM service providers. Customers from any bank can deposit or withdraw money from such ATMs. They will provide ATM services to customers of all banks.

RBI decides to permit Non-Banking entities to set up ATMs in India: Currently, only banks are being permitted to set up Automated Teller Machines (ATMs) in India. At end January 2012, the country had 89,655 ATMs, according to the National Payments Corporation of India. For the growth of ATMs across the country, the Reserve Bank of India has given guidelines to allow non-banking entities to set up, own and operate money dispensing machines. As per the Payment and Settlement Systems Act 2007, the non bank entities should have a minimum net worth of Rs 100 crore & have to apply to RBI for seeking approval. Such ATMs will be White Label Automated Teller Machines-WLAs and will provide ATM services to customers of all banks. WLA cannot charge customers. Feedback from banks, authorised ATM network operators, non-bank entities and members of public in this regard has been taken into account by RBI upto 6th of next month. The WLA Operator would be permitted to earn extra revenue through advertisement and by offering value added services. Being non-bank owned ATMs, the guidelines on five free transactions in a month for using other bank ATMs would not be applicable for transactions affected on the WLAs. The charges for the transactions should be displayed on the screen before the customer initiates the transaction.

Advantages associated with WLAs: A white label ATM may work in an area where real estate/ rental charges are very high or in smaller centres where banks may not want to set up their own ATMs. It will accelerate the growth and penetration of ATMs in the country.

Although there has been about 30 per cent year-on-year growth in the number of ATMs deployed in the country since 2008, ATM penetration on a per capita basis continues to be less compared to other countries. WLAs will assist in Financial Inclusion in the country. Problems that may be associated with the WLAs: While welcoming the RBI's move to allow WLAs to ensure penetration of the ATM network in the country, bankers caution about the pitfalls customers could be inconvenienced in case of failed transactions on WLAs as the dispute resolution mechanism will involve three entities the WLA operator, the sponsor bank of the operator, and the customer's bank. Currently, in the case of failed ATM transactions, the customer has recourse to his bank, though he may have transacted at another bank's ATM. Another issue that non-banks setting up ATMs could face is whether a customer would be ready to pay charges for transacting on WLAs. Except in the US, in all markets that allow white label ATMs, the share of such ATMs is no more than 25 per cent of the entire ATM network. They are always complementary to bank ATMs.