• Ratnesh Mittal

White Labelled ATMs - A Primer

Do the names IndiCash or Money Spot ring a bell? Believe it or not, these are ATMs just like the ones run by large banks except these are not run or owned by any bank.


Surprised! Welcome to the world of White Labelled ATMs or WLAs, for short. They are not an esoteric breed either – collectively, WLAs make up 10% of the total ATMs in India.


White Labelled ATM

What is a White Labelled ATM?


ATMs set up, owned and operated by non-banks are called WLAs. Non-bank ATM operators are authorised under the Payment & Settlement Systems Act, 2007 by the Reserve Bank of India (RBI). In all, there are 4 active White Labelled ATM companies in India operating nearly 23,000 ATMs currently. The list of authorised WLA Operators is available on the RBI website at this link.


For a user, WLAs offer transactions to customers of all banks. However, a transaction at a WLA is counted among “Off-us” transactions i.e. these are treated as transactions done outside your card issuing bank's own ATMs and accordingly monthly limits and charges apply.


What is the Business Model of White Labelled ATMs?


WLA operators are responsible for the entire capex and opex in setting up and running an ATM. They are governed by rules of RBI in terms of the number of ATMs they can operate in lucrative towns to meet the governments financial inclusion objectives. But within those broad rules, they can select the specific location of the ATM and the associated costs such as rent, electricity, cash management, security & connectivity. WLAs recover their costs and profits from the transactions carried out by banks' customers. E.g. if a customer of Bank A withdraws cash or checks her account balance at a WLA, then Bank A pays a transaction fee to the WLA operator for each such transaction at a price set by RBI known as the Interchange Fee. So, in order for a particular ATM to be profitable for the WLA operator, it must generate enough transactions to cover all the cost of that ATM including capex.


For this reason, the location of a White Labelled ATM becomes super critical as that governs footfall and consequently, the number of daily transactions.


Some WLA operators such as Tata Communications Payment Solutions and Hitachi Payments have begun to offer franchise licenses for WLA to local entrepreneurs in order to achieve growth and reduce costs. From a franchisee perspective, it is an opportunity to earn higher ROI especially if they have unused space in populated areas.


Recent Developments and their impact on the future of WLAs


Until a few years ago, India had 8 white labelled ATM operators, together expected to add 200,000 ATMs. But after 9 years of the policy, that number is nowhere in sight. Recently. there have been a number of developments with a long term impact on the WLA business:


a. The number of WLA operators has shrunk from 8 to 4 in just about a year. Some operators have ceased operations voluntarily while some like AGS Transact and Riddhi Siddhi Bullion have had their Certificates revoked by RBI for regulatory reasons.

b. The RBI’s new policy of restricting opening of current accounts with any bank other than the lending banks has indirectly created a working capital management challenge for WLA’s cash operations in rural areas

c. After 9 years, RBI has increased the interchange fee for ATMs from Rs.15 to Rs.17 for cash transactions and from Rs.5 to Rs.6 for non-cash transactions. These changes have just come into effect from 1st August 2021 and will improve revenue outcomes for WLAs, even if marginally.

d. Lastly, RBI has allowed non-banks, including WLAs, access to its Centralised Payment Systems. That means, WLA operators can now directly use NEFT and RTGS platforms without having to go through banks. Of course, this come with some riders but on the whole, it can help WLAs offer better services and reduce operating costs.


These are mixed developments and reflect the glass half full nature of the WLA business. Given the large unbanked population, WLAs surely have a large addressable market provided they can evolve their business model defusing costs and improving revenues through greater service availability.


More services require better technology deployed and better connectivity to deliver transactions expeditiously and cost effectively. At Axon Networks, we provide network solutions for banks and ATMs and through our managed networks services, help them achieve profitable ATM operations. Learn more about our solutions for the BFSI sector here.

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