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The most significant development in the ATM market this year was the much awaited RBI guidelines in April 2009 that made ATM transactions free of charge across all banks. While the initial speculations were that these guidelines might lead banks to rethink their ATM footprint, the growth figures proved otherwise, indicating that banks are now more bullish than ever about tapping the under-banked segment. And according to experts, ATMs will continue to play a significant role in this broader objective of inclusive banking that RBI has laid forth.

According to RBI, the number of ATMs in the country as on May 31, 2009, stood at 44,857. This is a healthy addition of about 10,357 ATMs compared to FY 08 and has translated into a 30% growth in units.

Market Update
According to the Global ATM Market & Forecasts 2013 report published by Retail Banking Research (RBR), the penetration of ATMs in India is pretty low compared to her Asian counterparts. Currently, India has about thirty-three ATMs per million, population whereas China has about ninety-eight ATMs per million, Singapore has 419 ATMs per million, and South Korea has a density of 1,600 ATMs per million. However, a Frost & Sullivan report says that the ATM market is slated to grow in India reaching a penetration of fifty-six ATMs per million by 2010.

In terms of revenue, the market grew to an estimated Rs 732 crore. This, however, comprised the ATM equipment and the annual maintenance contract (AMC) services only. There is an entirely different services market around ATMs such as cash dispensing, security, cash management, call centers, etc, that continues to contribute much more than the ATM equipment market itself. An increasing number of banks are looking for services bundled with their ATM purchases to reduce TCO in the long run. Dataquest, however, does not delve into this segment due to the sheer fragmented nature of the ATM services market and also for computational purposes.

Today, banks are increasingly migrating towards the self-service model to achieve cost savings and also increase the convenience for customers. Hence, ATMs are now seen to be more than mere cash dispensing machines. According to a report by Celent, today banks are encouraging customers to use ATMs to recharge their prepaid mobile phone connections, pay utility bills, and even make mutual fund transactionsputting them at par with the flexibility given by Internet banking, and even making it more secure. Of the value added services provided at ATMs, bill payment is the most used service, followed by prepaid mobile talktime recharges. Also, to boost penetration in smaller towns and rural markets, many ATM vendors have devised specialized machines, embedded with biometric devices for authentication. This enables the rural population to interact with the machines in their local language and on a graphical user interface. The rural customer seems to have accepted this new medium. This has the potential to further widen the scope of ATM usage in the interior parts of the country.

The Market Leaders
Currently, the ATM equipment market is more or less made up of three prominent playersnamely NCR, Diebold and Wincor Nixdorf. These equipment providers are also service providers catering to end-to-end solution needs in the ATM space. NCR continues to be the market leader with close to 52% market share, followed by Diebold at 33% and Wincor at 15%. Though Wincor is a relatively small player in the market compared to the other two competitors, it has been steadily gaining market share. Another, relatively new entrant in the market is Korean ATM manufacturer, Hyosung. It has also been trying to grab some mindshare after having set up its assembly plant in India. On the ATM management and services side, Euronet is the largest player with around 4,200 ATMs under its management. Euronet also runs a shared switching services network, Cashnet, which facilitates inter-bank transactions for cash withdrawal and balance inquiry. Recently, it has also started providing value added services to customers by providing prepaid mobile top-ups in ATMs and Internet sites of banks and retail trade terminals. Its shared services business and value added services business has connections to over 32,000 ATMs in the country.

CyberMedia Research   DQ Estimates

HDFC Bank deployed the largest number of ATMs in FY 09, whereas SBI continued to expand its ATM footprint taking its total ATM installed base to 12,250the largest in the country

During FY 08, NCRs unit-wise share of the market dipped a little, but FY 09 was again a year of growth having bagged some large orders and having deployed 6,000 ATMs. NCR bagged the largest ATM contract from SBI to deploy about 3,000 ATMs in the next eighteen months. The contract encompasses hardware, total installation services, and ATM network management services, and the ATMs will have a host of functions including mobile phone top-ups, utility bill payment, voice guidance for ATM operations, multilingual screens, and a touchscreen ATM locator. SBI has also announced plans to install 150 touchscreen biometric ATM machines across Gujarat by the end of the current financial year. Diebold too has been part of SBIs expansion spree bagging a major deal for site preparation for 2,740 ATMs. It has also been providing biometric ATMs specially designed for the Indian market.

CyberMedia Research   DQ Estimates

There were no brakes in the momentum of ATM deployment. NCR accounted for half of the market in terms of unit sales

In another large deal, NCR has upgraded 1,200 HDFC Bank ATMs with its jitter-enabled card readers that help prevent skimming. Apart from this, HDFC Bank also renewed its contract with NCR to manage 2,000 ATMs and placed an order for 300 new ATMs. HDFC is also in the process of providing its customers an additional feature of Personalized Cash Withdrawals (developed by NCR) on all its ATMs where customers will have the option of pre-setting their withdrawal amount, with the help of which their future ATM cash withdrawal transactions will be 40% faster than usual. NCR also bagged a deal from Axis Bank to deploy 400 new ATMs from NCR that will also deliver value added services. Apart from this, NCR also successfully completed its pilot project for Cheque Truncation System (CTS) in Delhi for the RBI. According to industry estimates, with over 1.3 bn cheques being processed annually, India boasts of the largest cheque truncation project in Asia.

NCR also rolled out Biometric solutions for Canara Bank in India. Another new initiative is the NCR EasyPoint 70 Tijori, an innovative micro deposit solution, with smart card and biometrics technology that enables banks and micro finance institutions (MFIs) to scale their services and reach the unbanked people across India. While NCR and Diebold are the major players providing biometric ATMs in India, other products like Grammteller, a low-cost ATM developed by IIT-M TeNet group and Vortex, have also entered the market and promise to significantly reduce the cost of operations for the banks.

Wincor Nixdorf, on the other hand, has been largely focusing on cash dispensing and cash deposit machines, compared to full function ATMs, and has a long customer list ranging from SBI, ICICI Bank, Punjab National Bank, Axis Bank and Union Bank of India. AGS Infotechs, which is the primary distributor for Wincor in India, is of the opinion that the full function ATMs are fast fading out and that banks are now buying cash dispensers (CD) as they perform all functions of an ATM except envelope deposits. According to AGS, banks are reducing the cost of the ATM channel, where a CD has lower capex and opex. Also, the transaction volumes have increased and more banks want to install two or more units in an ATM room; and cash dispensers offer a much smaller footprint in this regard.

Whats in Store
With a view to boost value added services amongst customers, banks are looking to set up mobile ATMs. Though the mobile ATM costs more than normal ATM, banks are insisting on their deployment and are typically using mobile ATMs as a mini branch.

There is also a growing interest towards white-label ATMs which are prevalent in the US. Many companies are interested in this model, where the ownership of the ATM will not be with the bank but with a third party who would deploy them and make money on the fees charged on every transaction. The recent deal between Yes Bank and First Data Corp marks the first time an ATM installation by a third party technology company has been signed. First Data will be setting up 3,000 ATMs for the bank over the next five years. Yes Bank will handle the banking transactions such as cash management, complaints management, and interbank settlement. SBI too has entered into an agreement with Tata Communications and C-Edge for the roll out and management of 500 ATMs.

Soon, the Indian Railways will start using ATMs to issue tickets for long distance travel. The Central Railway (CR) has recently introduced an initiative whereby passengers can book their tickets through ATMs. Presently there are twenty-one ATMs installed on Mumbais central line to extend the facility, and all these ATMs belong to Canara Bank. Following suit, Bank of India, Punjab National Bank, Dena Bank, Union Bank of India and Bank of Baroda have entered an agreement with the railways to provide this facility in the proposed 1,000 dual purpose ATMs that will be installed in selected railway stations across the country. Recently the Indian Post also revealed its plans to install onsite ATMs for its savings bank account holders. Initially, ATM machines will be installed at select branches of the head post offices in different states across the country.

These positive shifts in the ATM market, the innovative ways to increase the ATM penetration in rural India, and the realization that ATMs can be an effective multi-functional device to deliver value added services has ensured that this market grows at the current or even at a higher rate over the next few years.

Priya Kekre
priyak@cybermedia.co.in

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