White Label ATM
What is White label-ATM?
Ø Traditionally, Automated Teller Machines (ATMs) have respective bank’s logo. So just by looking, this is SBI’s ATM, this is ICICI’s ATM and so on.
Ø But White label ATM doesn’t have such Bank logo, hence called White label ATMs.
Ø RBI has given license / permission to non-bank entities to open such ATMs.
Ø Any non-bank entity with a minimum net worth of Rs.100 crore, can apply for white label ATMs. (not just NBFC, any non-bank entity can apply.)
Ø Late 80s: first ATM in India; 2012: RBI issues guideline for White label; 2013: RBI gives license/permission.
Ø Tata Communications Payment Solutions Limited =the first company to get RBI’s permission to open White label ATMs.
Ø They started their chain under brandname “Indicash”.
Ø Some of the White Label ATMs are: Prizm Payment Services, BTI Payments, Srei Infrastructure Finance, RiddiSiddhi Bullions and Vakrangee Ltd.
Differences between Brown and White label ATM
Brown Label ATM
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White Label ATM
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When banks outsourced the ATM operations to a third party.
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When ATMs are owned and operated by non-bank entities but they are not doing ‘outsourcing-contract’ from a particular bank.
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The private company owns & operates the ATM machine, pays office rent. They negotiate with the landlord, electricity company, telecom company and so on.
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Same
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The bank (which has outsourced this work) provides cash for that ATM.
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Sponsor bank provides the cash.
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ATM has logo of that bank (which has outsourced this work).
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No. White label ATM doesn’t have such logo. Not even of the sponsor bank.
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No such compulsion.
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They’ve to compulsory open a few ATMs in (tier 3 to tier 6) areas. (explained after a few paragraphs)
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RBI not involved directly. These outsourcing companies have contractual obligation with their respective banks.
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RBI directly involved because these white label Companies have to separately get license/permission from RBI to run business.
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Initially, RBI did not permit White label ATMs, and Banks wanted to reduce the operational cost, so they came up Brown Label ATM (outsourcing) system. So in a way, the evolution is: (Bank’s own ATM) =>(Brown Label) => (white label)
Stakeholder/Players in White label ATM
RBI
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Gives license / permission to open White Label ATMs under Payment and Settlement Systems Act, 2007. (not under Banking regulation Act or any others)
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(non-bank) white label ATM company
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Rents the place, looks after maintenance and servicing of the machine
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Sponsor bank
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Loads the cash in those white label ATMs. This also ensure counterfeit / fake currency notes are not circulated through white label ATM
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Payment network operator
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Visa, Master Card, the National Financial Switch (NFS under National Payment Corporation of India)
They provide technical connectivity in the system
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Why do we need White Label ATM?
Country
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No of ATMs / 10 lakh population
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USA
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1400
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UK
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500
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China
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200
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India
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Less than 100
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§ ATMs offer convenience to customer (Because he doesn’t need to visit Bank branch every time). ATMs are open 24/7, and even on holidays.
§ Convenience to bank, because they don’t have to keep large staff/office (compared to a system without ATMs). It reduces their cost of branch-operation.
§ But in India, ATM penetration has been very low.
§ Most of the ATMs concentrated in urban areas- that too only at prime locations e.g. near shopping malls and airports= financial inclusion not achieved.
How does White Label ATM help in financial inclusion?
v RBI requires White label-ATM companies to install machines in the ratio of
v Two ATMs in (tier 3 to 6 place) : One ATM in (tier 1-2 place).
Center
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City
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Census Definition:
Population is ____
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White Label ATM
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Metropolitan
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Tier 1
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10 lakh and above
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If company wants to setup 1 ATM here
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Urban
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1 lakh and above
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Semi - Urban
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Tier 2
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50000 to 99999
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Company MUST install 2 ATMs here
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Tier 3
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20000 to 49999
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Tier 4
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10000 to 19999
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Rural
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Tier 5
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5000 to 9999
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Tier 6
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Less than 5000
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Ø For example, RBI has permitted Tata to deploy 15000 White label ATMs. Meaning [2/(2+1)] x 15000 = 10,000 ATMs will be setup in the rural and semi-urban areas. = more access to ATM= financial inclusion.
Facilities in White label ATM
§ Any customer from belonging to any bank, can use it.
§ Every month, Five transactions are free.
§ White label ATM users can also withdraw a maximum of 10,000 per transaction.
§ Open 24/7 and on holidays
§ Value added services like mobile recharge, utility bill payments etc.
White label ATM: Challenges/Limitations/Problems
§ For a white label ATM company, biggest challenges = office rent + Security guard.
§ If they want to make profit, every White ATM needs to get at least 75-125 transactions per day= very unlikely, especially when RBI requires them to setup 2/3rd of the ATMs in semi-urban and rural areas.
§ Even in Bangalore, some of the white-label ATMs are getting barely 2-3 customers every week=loss making business at the moment.
§ Despite the entry of White Label ATM companies, the regular banks have not slowed down their ATM expansion drive, because branded ATM=passive advertisement and customer loyalty. Result? ATMs everywhere =too much competition= small players will bleed out just like in aviation business.
§ Last year, a lady was brutally attacked in ATM booth in Bangalore. Police have warned all banks to put security guards=input cost increased. Banks themselves admitting “five transactions free every month=loss making” in this scenario.
§ SBI has the largest ATM network in India (30,000+) = economies of scale= they’re supposed to be making profit. But, even SBI chairman herself has admitted their ATM business is making losses. So, it is unlikely that White label ATM companies will run profitably for a long period of time.
§ Customer complaint: failed ATM transactions = matter falls into Issuing Bank (=bank where you have account).
Where does the commission comes for White Label ATM
Before White Label ATM
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With White Label ATM
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* If you used card in your own bank’s ATM= everything free.
* If you used card on other bank’s ATM= first five transactions free (every month). After that commission charges of Rs.~17-20 for taking out money and Rs. 5-9 for making balance inquiry or mini statement. (This commission directly charged on your account.)
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* First five transactions free every month.
* Then, transaction fee ~Rs.15 and balance inquiry fee ~Rs.5 BUT this commission is paid by your bank to the White label Company.
* White label company cannot directly charge money on you. (RBI rules).
* Although it doesn’t mean White label ATM=totally “Free” because your bank will cut those charges from your account.
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Additionally, White Label ATM company can make commission from
ü Value added services @their ATM e.g electricity /telephone bill payments, mobile recharge, Dish TV- Tata Sky recharge etc.
ü Selling advertisement space in the room and above the door.
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100% FDI in White Label ATMs:
The Union Cabinet
approved 100% Foreign Direct Investment (FDI) in white label Automated Teller
Machines (WLAs). White label ATMs are those that are being set up by non-bank
entities. In contrast to the earlier norm of going through the approval route,
this decision by the cabinet allows foreign investments through the automatic
route.
However, any
non-bank entity intending to set up WLAs should have a minimum net worth of 100
crore rupees as per the latest financial year's audited balance sheet, which is
to be maintained at all times.
The change in the
policy guidelines is primarily aimed at extending the financial inclusion
principal even to the Tier III to VI cities across the country. The extended
reach of ATMs will allow beneficiaries of the Pradhan Mantri Jan Dhan Yojana to
avail a wide variety of banking services like accessing their accounts for
dispensing cash and non-financial services without the need for actually
visiting their bank branch.
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