‘An ATM Is More Than A Till-box’

The automated teller machine (ATM) industry is going through tough times. Deployment has slowed down; India will cross the 400,000-mark only in 2019, says the London-based RBR whose reports are the gold-standard in this line of business. Be that as it may, Navroze Dastur, managing director of NCR Corporation (India & South-Asia), however, says banks can ‘extract’ a lot more from ATMs and the firm’s line-busting offerings. In a chat with BW Businessworld’s Raghu Mohan, Dastur talks about the future of ATMs.

Excerpts:

ATM deployment has dipped for the first time in two decades. It is well below the industry forecast of 4,00,000 in 2017. Did the industry miscalculate when it bet big on brown- and white-label deployers?
I don’t think so. If I’m not mistaken, in 2012 we were at about 75,000-80,000 ATMs and had started to see double-digit growth. From that point when you look at 2019 and 400,000 ATMs, it’s a large number.

You had North Block’s brown-label initiative to deploy 62,000 ATMs in two years. Unfortunately, it didn’t take off in the desired manner as D. K. Mittal who was driving it as secretary-financial services moved on. And we had certain understandings. Say you won Karnataka, then ATMs of state-run banks would be deployed through you; existing ATMs would also be managed by you. That additional piece was never contracted, but people looked at the overall market and bid aggressively. Your cost per transaction should be in the range of about Rs 10; if you are going to bid lower, then you’re going to bleed.

Then you had the Reserve Bank of India’s white-label policy as a lot of banks were not willing to go deep into rural areas. We thought the industry would really grow based on the licences given out. Now when they bid, the inter-change was Rs 18, but it went down to Rs 15 and impacted the whole business model. It’s actually lower as part of it goes to the settlement bank.

So when you look at the whole math, if I’m running an ATM channel, then where am I going to make money? And when am I going to break even? As an industry, what we were recommending the government at that point was to give us infrastructure status.

By ‘we’, do you mean NCR or the industry?
The whole industry. Infrastructure status will basically provide me with funding and financing. And why do I need this? In financial inclusion, the last mile plays a key role. We had this very successful Jan-Dhan Yojana where we opened many accounts and issued debit cards. We are going to have direct-benefit-transfer routed into these accounts so the end-recipient doesn’t get cheated by middle-men. Suppose a person in a rural area gets a subsidy of Rs 1,000, where is he going to get that money from? He has to either find a branch or an ATM. Now, if the branch is 50 km away from where he stays, it’s a cost. If there’s an ATM between two or three villages, the person can withdraw cash; its available 24/7. Only an ATM can give you that flexibility and convenience; it’s the most trusted channel after the branch.

What was the response to the demand for infrastructure status?
We lobbied. Nothing came out of it.

And banks were not part of it?
No.

Why didn’t banks support you?
They should have. You say Jan-Dhan is great, but the last mile of that is missing.

What’s your view on digital? After all, ATMs are rooted in the cash-economy…
That’s another big story doing the rounds. If you look at the economy, more than 90 per cent of transactions are in cash. You can’t change it overnight and go digital; it’s not going to happen. You can do a lot of P2P; you can do a lot of Uber and all of that. But look at Uber, they at first accepted only card payments; then they were forced to take cash as well. Because the consumer said, “this is the way I want to pay you”. This whole desire of doing away with cash and saying we will have a cashless society is a fallacy to me.

You mean it’s very much a cash and dash market today and we are effectively getting a bit ahead of ourselves with all this talk of digital payments…
Correct. It’s a fallacy to say that in the next two or three years, India is going to become a cashless society. Yes, I can say with confidence that we will use less cash, but we can’t become cashless.

Now let’s look at the digital story. You have multiple modes of payment; you’re going to have a lot more of these things which require technology. But today when you say two-thirds of the population live in rural areas, am I trying to address one-third of the market? That’s something we have to be very clear about. Because in rural India, technology will play a role provided it’s available; in urban areas, technology will be used. People will move on to non-cash modes of payment (wallets and peer-to-peer payments); a lot of those things will happen, but even that’s not happening at the pace we want. It takes time for behaviours to change. It also requires a lot of nudging and pushing. You can achieve your objectives, but then you have to have very clear timelines.

But are banks even fully leveraging the existing ATM network?
Let me say the industry for ATMs and banks in India is cash and dash. Basically, banks want you to go to the ATM, withdraw cash and go away. They don’t want customers to highly engage with the ATM. There’s a reason for it. Because you are under-penetrated at about 125 ATMs per million compared to 350 in China or 1,200-1,500 in the US. What happens if queues start to form outside ATMs? Your customer will move on to the next ATM. So you will lose revenue opportunity and also end up paying (by way of inter-change) for your customers going to another bank’s ATM. When the ATM density reaches a sizeable number and there are no big queues, you will be able to offer much more services. Today, there are about 20 types of transactions on offer (on ATMs), but how many use them? So the bulk of the money, the revenue model for the ATM deployed is the inter-change fee.

What more can you do with existing ATMs with the current level of technology?
Technology has evolved. We started off with cash deposits and now we have moved to the next level where we do recycling which cuts down on the loading cost. NCR has an ATM which we call AIT (Automated Interactive Teller), which we have put up in New Delhi. Whatever you do through a branch teller, can be done by this machine; the teller is remotely situated and you have live video streaming. You can talk to the teller; deposit and withdraw cash; put in a bearer cheque and get cash against it; deposit a cheque and send it straight through processing and clearing; update passbook; lots of things can be done.

The beauty of it is that it will give uniform and extended service. Imagine a situation where I give a bearer cheque to a carpenter or plumber, and he can go at 9 at night and the machine will swallow the cheque. The teller at the back-end will check my signature with my old banking signature and make him sign on the signature-pad as proof he’s collected the cash and the transaction is completed.

The ATM as a branch has been tom-tommed earlier, but banks have done little to educate customers about self-service…
Whenever you come in with a new technology, it’s going to take time for people to adopt it. If you say I will put one device and expect my customers to start using it within one night, it’s not going to happen. Even today, for cash depositor and recycler, if you go to any bank that’s deployed it — usually placed in the lobby of the branch — and tell the teller “I want to deposit Rs 10,000”, he will say “Sir, please go to the machine”. They have a concierge there who will then help you deposit. So what are they doing? They are changing your behaviour at a time. The next time you will go to the machine and do it. So that’s where the self-service angle comes into the picture.

Beyond banking, where does self-service come into play for NCR? I mean the coffee shop, airport, where else...
Yes. Self-service in the US and European markets is big. You have self-check-out terminals, where NCR is the market leader. We are there in the travel space where we have kiosks. If you look at Delta, I think about nine of the top 10 airlines in the US use NCR’s check-in kiosks and self-bagging terminals. Plus, they have the NCR software suite that allows you to book, select seats, indicate meal preference, weigh your bags, put a sticker and much more on your mobile phone. It helps to cut down on their costs in a very big way. It also gives power to consumers to do a lot of things on their own. Similarly, in the US, passport scanning can also be done on NCR terminals. This is what we call automation and self-service where you do everything on your own.

And so in retail, if you go to a Walmart or a Tesco, there’s large deployment of NCR for self-check-out where the customer comes in, weighs his own material, gets it billed on his own, pays cash or by card and gets it bagged automatically. Say for instance, I bought five beer bottles, I can’t bill just one and try to walk out with the other four without paying. There’s a weighing system. When the stock comes in, each and every item is weighed. So when a shopper scans an item for buying, the barcode scanner cross-checks the weight before bagging. So, a bag will not be released if there’s anything wrong.

If we look at hospitality, a lot of food chains like Burger King when it came to India with plans to open a few hundred outlets in India, it used the NCR software suite to drive its whole application. The whole back-end software is driven by NCR. We also have point-of-sale terminals, but Burger King did not take that because we don’t manufacture those in India. It helps in inventory management — of your buns, onions and cutlets — from their side also. Not many people in India today are aware of all business verticals NCR is in; you largely look at NCR as an ATM manufacturer.

From a technological point of view, what is the shape of things to come? Biometric ATMs?
Very much. Most of my shipments are biometric-enabled. It’s up to banks and how they want to use that technology in terms of connecting with the other new IDs (identifications). So you could use biometrics as one form of ID. Today you have two levels of authentication — card and pin. Tomorrow, you could have card and biometric instead of putting in the pin; the machine is capable of putting all that in. We have a huge plant in Chennai where we manufacture ATMs for the local and export markets.

How does the NCR order-book look?
The order-book looks very healthy. Our market share is close to about 48 per cent. If I were to look at the whole ATM market per se, there’s some amount of consolidation that’s happening. You would have heard about the Diebold-Wincor Nixdorf merger.

It’s becoming a duopoly now — NCR and Diebold Nixdorf. There’s already talk of the Diebold-Nixdorf merger creating some kind of a beast…
Yes, it has created some amount of unrest in the minds of customers. They are not sure which product line is going to continue. When two competing companies merge, they have equal and same products, services and software also. So now that common entity ends up with double the quantity of products and services. The question then arises is that you are going to rationalise. You can’t say I have 30 ATMs and you have 30 and we both decide to form one company. We can’t form one company of 60 different models. To manage that, will be a nightmare.

To conclude, will you say an ATM is more than a till-box?
Absolutely.

raghu@businessworld.in, @tabonyou