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White label ATMs will drive massive expansion in Indian market

May 2, 2013 by Dominic Hirsch — manager, Retail Banking Research

Following many years of unfulfilled potential, the Indian ATM market started expanding a decade ago — driven first by the country’s private sector banks, and latterly by the State Bank of India.

In 2003, the Indian ATM installed base grew by 4,000 units, which at that time was a remarkable 50 percent increase on the previous year. A new phenomenon is ushering in a new era for Indian ATMs, which will make these figures pale into insignificance, however.

White label ATMs deployed in association with local state banks, but operated by independent companies, look set to create an ATM boom which will exceed that seen in the United States following the introduction of ISOs (a slightly different form of independent ATM deployer).

Between 1996 and 2001, the number of ATMs in the U.S. increased from 152,000 to 345,000. By comparison, RBR forecasts that the Indian ATM market will increase from 110,000 in 2012 to 400,000 by 2017. 

This expansion is not without risks, however. The U.S. boom was based not just on the diversification of deployers, but also, critically, on the ability to generate additional ATM revenue directly from customers in the form of surcharges. In contrast, the Indian market does not allow surcharging, and there has been downward pressure on interchange and foreign fees.

In an environment where income is limited, white label deployers will need to rely on healthy transaction volumes and an extremely efficient operating model.

With a rapidly expanding retail banking customer base, it is certainly possible that the volumes are there, although the business case will be weaker in more rural areas. In terms of efficiency, independent ATM deployers in other countries have demonstrated that focused, lean ATM operations are possible.

In recent years the global ATM focus has been mainly on China. Going forward, much of that attention will deservedly shift to India. There will be twists along the way, but the momentum towards a massively larger Indian ATM market is unstoppable.

Reprinted with permission from Banking Automation Bulletin.

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