Moneycontrol
Last Updated : Nov 24, 2017 05:33 PM IST | Source: Moneycontrol.com

More white label ATM penetration can aid financial inclusion

White Label ATMs or WLAs are ATMs that are owned and operated by non-bank entities where the only requirement of the bank is to provide or supply cash.

K Srinivas

In October 2016, there were just 14,427 white label ATMs across India of which 73 percent were in semi-urban and rural areas.

White Label ATMs or WLAs are ATMs that are owned and operated by non-bank entities where the only requirement of the bank is to provide or supply cash.

At one of New Delhi’s reputed book sellers in fashionable Khan Market, card (both debit and credit) payments have gained traction over the last year, but cash payments still are a significant portion of all payments.

The story is not any different in Haryana’s Hissar town (some 50 kms from Gurgaon), where a sizeable sale of gold and diamond jewellery in a leading showroom is still largely cash based. While it was understood that the common man especially at the lowest rung of the economic ladder transacts mainly in cash, amongst the well healed too, cash continues to remain a favourite.

Indians’ preference for cash is borne by the fact that currency with public, as per RBI data is Rs 1.53 lakh crore. Post-Demonetisation on November 8, 2016 which made Rs 500 and Rs 1,000 notes illegal tender and wiped out 86 percent of liquid cash in circulation with the objective of checking corruption, black money and counterfeit currency, cash continues to reign supreme in India, especially in the rural areas.

After dropping by more than 60 percent immediately post demonetization, cash withdrawals from ATMs have moved back to pre-demonetisation levels; September 2017 withdrawals from ATMs is 6 percent higher than September 2016.

Digital transactions have however fallen from a high of Rs 958 million (Rs 95.8 crore) in December 2016 to a low of Rs 861 million (RS 86.1 crore) in July 2017 and then stabilising by rising marginally at Rs 877 million (Rs 87.7 crore) by September 2017.

Though cash is the preferred method of transaction, especially in rural, the incremental ATM deployment has reduced to one fourth of pre-demonetisation levels. This is sharper in rural wherein the deployments have virtually come to a standstill. This is aggravated by the fact that rural India predominantly transacts in cash and has a very low ATM density of 5 ATMs/ lakh population whereas urban markets have 53 ATMs/ lakh population.

Such low ATMs density in rural makes access to money a critical constraint to financial inclusion. While public sector banks operate only about 20 percent of their ATMs in rural areas, the reach of private banks in the hinterland is far poorer with just 8 percent of their ATMs in these areas.

Low ATM density is accentuated by the fact that ATMs in rural India still dispense large denomination notes of Rs 2,000 while the consumer requirement is for smaller denomination notes.

Even as cash still rules a large part of consumer transactions it is not to say that digital is not making inroads into the spending habits of Indians in urban markets with 2017 seeing a slew of payment apps being launched ---BHIM, AadharPay and Google’s Tez etc.

Further, debit cards numbering 700 million continue to remain the mainstay of digital consumer transactions and supported by aggressive deployment of POS (point of sale) machines by banks over the last 1 year. Though the POS deployment has doubled in the last 1 year the value of debit card transactions it supports is only 15 percent of ATM transaction value.

One of the initiatives that the RBI took a couple of years ago, was to grant licences to non-bank entities to set up white-label ATMs (WLAs) in the country. The main objective of this was to expand reach of ATMs in semi-urban and rural areas, where banks were not able to put up ATMs.

Hence almost 73 percent of WLAs operate in semi-urban and rural areas. However, since the total number of WLAs itself is significantly smaller than bank-operated ATMs, access to money still remains a challenge.

As of October 2016, there were just 14,427 white label ATMs. Although customers have started transacting in cash, especially in rural areas and the ATM a significant impetus to deployment by WLAs can help fill this void and accelerate the process of financial inclusion by providing easy access to money without making the rural customers hunt for an ATM.

(Author is the MD and CEO of BTI Payments, a white label operator).
First Published on Nov 24, 2017 05:29 pm
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