ATMs & The Economics Of Compliance

The ATM, which is a critical service delivery channel of any Bank, has come under a lot of pressure, ever since demonetization dried up the cash in the channel and shook its very fundamentals.

- Radha Ramadorai

Hardly had the Banks and the other constituents of the ATM industry i.e. the Managed Service Providers (MSPs), the White Label ATM Operators (WLAs), the Cash Replenishment Agencies (CRAs) and the Original Equipment Manufacturers (OEMs), recovered from the after-effects of demonetization, came a double whammy which has jolted them so much that they are yet to come to their senses to form a coherent strategy around the same. These came in the form of three circulars issued by the Reserve Bank of India in 2018, and one gazette notification issued by the Ministry of Home Affairs in October 2018. The Regulator and the Government have the best intentions of the industry in mind and have issued these directions to make the channel secure and its constituents, strong. However, circumstances are such that immediate compliance to these guidelines would render the whole economics of running the channel, unviable.

The first circular is the one which requires an all-round upgrade of existing ATMs to make them secure from any skimming, malware attacks and other physical and logical frauds on ATMs. The second and the third circular are on the requirements for cash logistics, which requires a great deal of investment to be made by the cash logistics companies. There is a requirement to change the entire cash loading process in the ATMs which requires additional cassettes, vaults and additional cash to be provided by the Banks.