The document discusses trends in the global ATM market and outsourcing of ATM management in India. It notes that while cash transactions still greatly exceed non-cash, the number of ATMs globally is growing and projected to reach over 3 million by 2017. India in particular is seen as an attractive market for ATM outsourcing due to its large unbanked population and growth in debit card usage. Several large Indian banks have outsourced management of thousands of ATMs to cut costs and improve efficiency through economies of scale.

1. T r u s t t h e E x p e r t s
ATM Outsourcing in India and Global
Trends
Leveraging Economies of Scale
Even as the global volume of non-cash payments
continues to grow, transactions conducted in cash still
dwarf the non-cash transactions1
. This is true of even the
most mature economies like the USA and the Euro zone.
Retail Banking Research projections indicate a 6% growth
in ATM installations and an increase of 8% per annum
through 20162
. The ATM Future Trends Report 2012 (ATM
Market Place, ATM Industry Association) indicates that the
total number of ATM installations across the globe to be
over 2.3 million. Retail Banking Research’s recent report
forecasts the number of installed units to rise to 3.4 million
by 2017.
While US, Japan, Brazil and China account for half of the
global ATM market, Asia Pacific remains the largest
regional market. ATM installations and expansion of ATM
network is expected to play a greater role in the evolution of
payments in view of the large numbers of the
unbanked/underbanked population. The population per
ATM in India stands at 16,2433
In contrast the population
per ATM in US is 7614
. The Reserve Bank of India reports a
24% growth in year 2010-11 over the previous year. With
more than 65 per cent of the total ATMs (74,505 – as on
March 2011) belonging to the public sector banks, they are
poised to play an important role in the growth of ATM
installations India.
Also known as automated banking machines (ABMs),
cash-machines, cash-points, cash-lines or sometimes
holes-in-walls, ATMs (Automated or Automatic Teller
Machines – bank linked machines that debuted in the late
1960s) are basically computerized telecommunications
devices that enable the clients of Banks and other financial
institutions to perform financial transactions without the
need for cashiers, human clerks or bank tellers.
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2. T r u s t t h e E x p e r t s
Evolution - (Technology and Applications):
From once being purely cash dispensing mechanisms,
ATMs have significantly evolved to perform a wide range
of financial services - depositing cash and cheques,
checking transaction history, printing bank-statements,
paying bills, mobilephone top ups, dispensing
postage stamps, ticketing, gold-exchange, delivering
pre-approved loans and being a games kiosk. ATM as a
2
delivery channel is assuming greater significance and
the ATM industry is undergoing a major transformation.
Some of the technologies and applications, which have
not yet gained worldwide acceptance, are biometric
authorization, barcode scanning and multicurrency
recognition.
Standard ATM Device:
Outsourcing (OPEX Vs CAPEX):
Increased focus on better customer experience through
value added functionalities, regulatory compliance and the
pressure to cut down the operational costs are the key
trends shaping the ATM industry. A series of financial
crises, over recent times, has raised the focus on costs and
efficiencies as evidenced by a significant rise in enquiries
relating to ATM outsourcing.
One of the ways to bring down the cost in ATM
management is by achieving economies of scale. There
have also been initiatives in inter-bank cooperation to pool
ATMs, as in the case of Sweden, where five of the biggest
banks are transferring ownership of their ATMs to a
separate company in the interests of economies of scale.
India is also moving in a similar direction. This trend is seen
to combine with efforts to outsource ATM installations and
their management. Thanks to the rapid growth in
cardholder base (25% growth over previous year in debit
cards during year 2010-11) and the central bank’s focus on
financial inclusion through card penetration and
operational efficiency of ATM channels, India is emerging
as an attractive market for ATM outsourcing. The
government favours the OPEX, or operational expense,
model for ATM expansion in the country rather than the
conventional CAPEX or capital expenditure, model.
The past few years have seen some large ATM outsourcing
deals. In 2010, the deal between ‘Yes Bank’ and ‘First Data’
marked the first of such deals. First Data was to set up
3,000 ATMs for the bank over five years, while Yes Bank
would handle the banking transactions such as cash
management, complaints management, and interbank
settlement. Around the same time, ‘Axis Bank’, the
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3. Reliability and Security:
With the rapid rise in ATM installations,
outsourcing, pooling and a multiplicity of newer
applications, reliability and security become ever
more critical.
ATMs and the supporting electronic networks are
generally very reliable, with industry benchmarks
typically producing 98.25% customer availability for
ATMs and up to 99.999% availability for host
systems that manage the networks of ATMs.
Nevertheless, considering the gravity of
malfunctions in a rapidly evolving environment,
before an ATM is commissioned to transact, it has
to undergo extensive testing with both test money
and backend computer systems. Such testing
would have to be more and more rigorous as more
and more features are incorporated. Front-end and
back-end systems are also accordingly built to
weed out counterfeit currency (bill validation) and
to audit each transaction in case of disputes.
As with any device containing objects of value,
ATMs and the systems they depend on to function
are the targets of fraudsters. Such fraud takes
several forms.
Shoulder surfing, stand-in-time exploitation, card
cloning, card-thefts through the Lebanese loop and
waylaying replacement cards are some of
fraudulent routes that both the card service
provider and customers need to religious guard
against despite counter measures such as smart
cards, which cannot be easily copied or spoofed by
unauthorized devices.
T r u s t t h e E x p e r t s
White Paper - ATM Trends 3
country's third-largest private sector lender signed
contracts with Prizm Payment Services and AGS Infotech
to set up and manage 5,000 ATMs on a purely variable
model outsourcing deal. As it’s a fully outsourced deal, the
bank would not incur any capital expenditure. The ATMs
are to be owned and managed by the two service
providers. Axis Bank would only be responsible for cash
settlement and would pay the service providers a
per-transaction fee. The fee for each cash withdrawal
would be Rs 13 to 15, and for a balance enquiry Rs 3 to 5.
Giving further impetus to the ATM outsourcing trend, 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 - Tata Communication
& Banking Infra Solutions (TCBAIL), Electronics Payments
and Systems (EPS), AGS Transact Technologies,
PrizmPay, NCR, FSS, FIS, Accura Infotech and MphasiS –
includes a medley of start-ups and giants like the Tata
group and NCR. The deal is expected to generate
revenues of over Rs 1,000 crores (about $18.19 million), in
seven years against a capital expenditure of about Rs 350
crores.
State owned PSBs have chosen service providers by
dividing the country into 13 zones and auctioning the
contracts for installing 3,000 to 6,000 ATMs with each zone
going to the lowest bidder. By coming together, the public
sector banks have brought down the transaction rates
through economies of scale. At present, a bank pays a
transaction fee of Rs18 to the third-party ATM operator
every time its customer accesses the ATM of another bank.
With the current deal, banks have managed to bring these
down the rates dramatically. It is interesting to note that at
the lower end of the spectrum TCBIL charges Rs 6.6 for
offsite cash transactions for the Tamil Nadu zone and at the
upper end EPS charges Rs 11.9 for offsite cash
transactions in Maharashtra and AGS charges Rs 12.10 for
Chandigarh, Haryana, and the Himachal Pradesh zone.
The ATM market is poised for further interesting
developments as operators are now trying to get
manufacturers of the
machines to opt for a
new business model,
whereby they will
be paid for every
transaction, instead
of getting an
upfront payment for
acquiring the machine9
.
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4. Shape of things to come:
Considering operating costs, ergonomics, trimming user transaction times, convenience,
hygiene, privacy, flexibility and security the ATMs of the future are set to take the following
shapes and sizes.
White Paper - ATM Trends
The IDEO
• Turned 90° sideways to
make others waiting in
line visible to user
• 19’ touch screen for less
confusion
• Two slots for card
insertion and deposits
• Most banking options in
an intuitive manner with
personalized settings per
user
• Transaction time in
minutes
• Piloted in 2009 and being
beta tested since 2010
• Designed by IDEO a global
consultancy firm for BBVA
the Spanish Banking group
The Cash Barrel
• Screen free cylinder for
withdrawals only
• Selection from a flashing
row of fixed sums after
dipping card or scanning
thumbprint.
• Cylindrical design
ensures better security
with no corners to pry
• Low production costs with
fewer moving parts
• Transaction time in
seconds
• Designed by NCR presently
the world’s largest ATM
manufacturer
The Tower
• No physical interface but
for NFC enabled
technology.
• Users set up withdrawals
on cellphones and then
tap them on the console
to get the cash.
• Small and slim design
saves physical space
• Transaction time in
seconds
• NFC = Near Field
Communication
The Motion Sensor
• Touchless interface that
involves finger pointing
and waving.
• Better hygiene in the
absence of germ-riddled
touch screens and
keypads
• Provides for numerous
in-depth banking options
• ATM shape of a woman
sitting invokes calm**
• Transaction time in
minutes.
• ** calm helps to overcome
fear of technology amongst
first time users and those
with technology phobia
• An NCR design
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T r u s t t h e E x p e r t s
Bibliography
1 World Payments Report - 2011
2 Future of ATMs Infographic
3 Report on Trend and Progress of Banking in India 2010-11, RBI
4 Overcoming ATM Challenges in India, Richard Slawsky
5 2012 ATM Software Trends and Analysis
6 http://www.livemint.com/2012/06/20220703/Outsource-ATM-management-to-cu.html
7 http://www.vrl-financial-news.com/cards--payments/electronic-payments-intl/issues/epi-2010/epi-274/atm-
outsourcing-heads-east.aspx
8 http://timesofindia.indiatimes.com/business/india-business/PSBs-strike-ATM-outsourcing-deal/articleshow/
14681944.cms
9 http://dawn.com/2012/07/09/popularising-atm-usage/
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