ATM sales on the downswing

India saw the number of ATMs grow to over 17,000 machines in 2005 from 1,500 ATMs in just five years. In the last one year, however, ATM sales in the country were down to about 2,000 pieces. Not because ATM market has saturated in the country, but because of regulations , industry players said.

ATM sellers thought booming economy, increasing card usage, rising customer expectations and cost savings for banks would keep the ATM growth going. For example , Venture Infotek in a survey on payment card industry said in 2005, "Five years from now bankers reckon that there will be roughly three ATMs for every one branch, which may result into around 70,000 bank branches and over 2,00,000 ATMs by 2010."

However, some doubt if ATMs would reach its potential with the current restrictions by India's central bank.

Mr Harish K Murthi, CMD, CashLink Global Systems, which markets ATMs, said.

"Some years ago, China was not far ahead of India in terms of the number of ATMs. Today, China has 1,20,000 machines, and India just a sixth of that. You would expect India to have atleast half the number of China's ATMs. But ATM sales have actually slowed down now," he said.

The total sales, all players put together, would be about 2,000 machines this year, he said. Compare this to the growth between 2003 and 2005. The number of ATMs grew from 7,851 in 2003 to 11,334 in 2004 and to 16,075 in 2005, growth of about 3,500 and 4,700 respectively.

In September last year, RBI stipulated that banks would have to take prior permission to set up offsite ATMs.

Another regulation that stand in the way of ATM sales in India is that RBI is against third-party ATMs (or Independent Sales Organisations ) to set up white label ATMs. In US, ATM growth especially after 2001, was primarily driven by ISOs.

DOWN SLIDE

RBI has stipulated that banks should seek permission before setting up ATMs

Regulator is against independent sales organisations setting up white label ATMs

THE POST EFFECT

IMAGINE a coffee shop and a jeweller next door to it. They are not likely to see each other as competitors - they serve different customer needs and stock unrelated inventories . In fact, they probably see themselves as complementing each other. For example, a man while sipping coffee might get induced to buy a diamond ring for his wife. Or, a couple , after a shopping spree at the jewellers, might decide to catch their breath over a cup of coffee next door. Given the synergy, a coffee shop would be as comfortable inside a jewellery shop, as it would be inside a bookshop . (And most good book shops come with cafes these days.

But, this could change. In the near future, the coffee shop and the jeweller could be competing for the same set of customers. In other words, they would stock the same inventories and promise to serve the same customer needs - even if it's for a small segment of their core clientele. These inventories would not claim any extra shelf-space from the jeweller or extra time from attendants in the coffee shop. In fact, they would be getting into new segments: ranging from aviation and telecom to entertainment and utilities. And all these thanks to a humble device that already sits in the sales counter - the Point-of-Sale (POS) terminal - the e-equipment the merchant uses to swipe credit or debit cards.

Piyush Khaitan, Managing Director, Venture Infotek Global, a transaction management solutions company said, "Traditionally POS terminals have been used to facilitate card payment transactions. But with the advent of new technologies the traditional POS terminal is now poised to undergo a sea of change."Industry players point to a number of services such as mobile top ups, airline ticketing, utility payments, micro banking, retail loyalty applications and even gambling that could be offered through POS terminals. "The potential is even bigger - and might include a lot of other services we don't even think of at present," Mr Anup Nayar, vice-president of POS and value added services division of FSS, a company specialising in electronic payment solutions, said.

THE TECH DRIVER

The growth of these services would be driven by technology and changing business needs. Mr Harish K Murthi, CMD of HMA Group, which offers technology solutions to the banking and financial sectors, said that any value-added service that could be offered over an ATM could be offered using a POS terminal because the back end was the same. "You just have to add a piece of software in a POS terminal to include more functions," he said.

THE BUSINESS DRIVER

The other key driver is changing business needs. "With more and more new services being unveiled and the increase in customer demand for efficient and convenient service delivery at his door-step , it's almost definite that such enhanced services would be the order of the day," Mr Khaitan said. If using POS terminals enables cost and service efficiency to operators it provides increased revenue to retailers, he said.

For a specific example, consider airlines. Today, it's acknowledged that e-ticketing helps airlines cut costs. While a paper ticket costs over Rs 400 to process, e-ticket reduces it to less than Rs 50, according to industry estimates . However, in India, e-ticketing penetration is estimated to be less than 15%. Industry players say one reason could be the reluctance of customers to share their card numbers with the call centre, or give it out online, for payments. Letting customers pay POS terminals should solve this problem. Mr Nayar said, "We can clearly see ATM and Point of Sale Terminals as the only channel other than Internet which can service the spread of locations for ticket payments." In fact, FSS has enabled e-ticketing through POS terminals.

FUTURE BRIGHT

Besides, POS terminals offer a ready distribution channel for these companies. According to a survey by Venture Infotek, there are 2.08-crore credit cards and 5.37-crore debit cards (estimated) at the end of March 2006. "Today, there are more than 1.9 lakh terminalised merchants, in 150 cities and towns across India that accept payment cards as compared to 0.7 lakh merchants with POS terminals in 1999-00 ," the survey said. It's a segment businesses can't just ignore, observers say. Interestingly, even with all this, the introduction of value added services is likely to attract a completely new set of players into the market. Standalone players who would offer these services, not unlike STD/PCO booths before the mobile boom in the country.

Mr Nayar said these standalone players were likely to operate within shops or malls, tapping the regular footfall. Mr Khaitan added, "We do believe that standalone players ... would enter the market once the volume and size of this business increases in India. With more and more customers seeking higher service levels this market is poised to grow. And with this growth more and more players including standalone players will also enter the market."