PSBs strike ATM outsourcing deal

MUMBAI: Public sector banks (PSBs) have ensured a drastic reduction in ATM transaction costs by inking one of the largest outsourcing deals in the financial sector under which nine firms have been contracted to install and manage over 63,000 ATMs. The nine companies, which include start-ups and giants like the Tata group and US-based NCR, will generate revenues of over Rs 1,000 crore in seven years against a capital expenditure of below Rs 350 crore.
Banks have chosen service providers by dividing the country into 13 zones and auctioning the contracts for installing 3,000 to 6,000 ATMs in each zone to the bidder with lowest charges. Tata Communication & Banking Infra Solutions (TCBAIL) has bid as low as Rs 6.6 for offsite cash transactions for the Tamil Nadu zone. At present if the customer of a bank uses another bank’s ATM, the card-issuing bank has to pay the third-party Rs 18 for the transaction. This transaction fee is expected to cover the capital cost as well as the operational cost which include rent, telecom, security, network and cash management. At the upper end of the spectrum, Electronics Payments and Systems (EPS) has successfully bid at Rs 11.9 for offsite cash transactions in Maharashtra and AGS has bid Rs 12.10 for Chandigarh, Haryana, Himachal Pradesh zone. The other firms are AGS Transact Technologies, PrizmPay, NCR, FSS, FIS, Accura Infotech and MphasiS.
“China has three times as many ATMs as India. Unlike in China, there is a huge population of bank account holders who do not have an ATM card in India,” said Mani Mamallan, founder, EPS. By centralising public sector investments in ATM, the finance ministry has brought in economies of scale and has done some collective bargaining as well. Each zone—some with large single states like UP and Maharashtra and others like north-east with seven states—is led by a public sector bank which held the auction. The lead PSU banks were Bank of India, PNB, SBI, BoB, UBI and Canara Bank.
According to Jaivinder Singh Gill, MD NCR India, outsourcing ATMs will help banks reduce capital and operational expenditure. But there are others who believe that some of the service providers have been carried away by their enthusiasm. According to Rajiv Kaul, vice-chairman & CEO of CMS Infosystems—which controls half the cash delivery business and subcontracts from ATM managers—some of the service providers have bid too aggressively and may find it impossible to deliver.