Banks are increasingly using the outsourcing route to scale up their ATM networks without wearing out their resources. The
entry of multinational financial technology service providers, who are keen to be a part of the payment space, has facilitated large investments in ATM network.
Axis Bank is in advanced stages of finalising its outsourcing vendor while others like Central Bank of India have recently signed an agreement. SBI has also adopted this model on some ATMs with different providers. Under this model, the cost of setting up and running the ATM is borne by the service provider while the bank pays a fee for every transaction. Since the bank has the ATM licence and also deploys its cash in the ATMs, it receives a portion of the fees generated by the use of the ATM by customers of third-party banks.
ATM transactions have jumped 40% after RBI allowed accountholders to access any ATM across the country without any charge for five withdrawals up to Rs 10,000 a month. Since April 2009, the transaction costs are netted out by bankers among themselves with each bank paying for any third-party ATM use by its customer.
Axis Bank, which currently has 4,000 ATMs, had started the process around eight months ago. Vendors who are in the race for the transaction include Tata Communications Banking InfraSolutions, AGS Infotech and Prizm Payments. The bank is likely to take a final decision within the next couple of months. “We had to build an entire new model. We also had to ensure that customers are not impacted.
Also, we have to ensure that costing is effective. ATMs are an important part of our branding strategy. The move would help the capital expenditure to go down,” said a bank official. The bank is likely to go in for a 2-3-year contract. The SBI group, which currently has around 17,000 ATMs, had last year signed an agreement with TCBIL to set up 500 ATMs. Once these ATMs are set up, it plans to issue another tender for setting up of another 1,000 ATMs.
“Considering the high capital investment and technology requirement, banks are finding it extremely convenient to partner with financially strong payment services company. With 140 million debit cards issued, banks are finding that the transaction volumes are increasing. From April 1, 2009, there has been nearly 40% jump in ATM transaction volumes,” says B Amrish Rau, country manager of First Data.
Setting up an ATM currently costs around eight lakhs, including the VSAT, interiors, signages, etc. Rental costs would differ from area to area and would range from Rs 5,000 a month in small towns to Rs 50,000 a month in upmarket areas in metros. The total expenditure per ATM would be around Rs 25 lakh over a 5-7 year period. The cost of a bank to set up say around 1,000 ATMs will be at Rs 100 crore.
Source:http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Banks-use-outsourcing-route-to-scale-up-ATM-network/articleshow/5442304.cms
