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White Label ATMs now !February 22nd, 2012

Brown Label' ATM: Outsourcing of ATM services by banks. The ATM is

named under the brand of the sponsor bank but the ATM machine is notowned by the bank. In such cases, the hardware as well as lease is under the

ownership of the service provider, while connectivity and cash handling and

management is the responsibility of the sponsor bank

White label ATM: These are ATMs which are not owned by banks but by

private ATM service providers. Customers from any bank can deposit or

withdraw money from such ATMs. They will provide ATM services to

customers of all banks.

RBI decides to permit Non-Banking entities to set up ATMs in India:-

Currently, only banks are being permitted to set up Automated Teller Machines (ATMs)in India.

At end January 2012, the country had 89,655 ATMs, according to the NationalPayments Corporation of India.

For the growth of ATMs across the country, the Reserve Bank of India has givenguidelines to allow non-banking entities to set up, own and operate money dispensing

machines.

As per the Payment and Settlement Systems Act 2007, the non bank entities should

have a minimumnet worthof Rs 100 crore & have to apply to RBI for seekingapproval.

Such ATMs will be White Label Automated Teller Machines-WLAs and will provide

ATM services to customers of all banks. WLA cannot charge customers.

Feedback from banks, authorised ATM network operators, non-bank entities and

members of public in this regard has been taken into account by RBI upto 6th of next

month.

The WLA Operator would be permitted to earn extra revenue through advertisementand by offering value added services.

Being non-bank owned ATMs, the guidelines on five free transactions in a month forusing other bank ATMs would not be applicable for transactions affected on the WLAs.

The charges for the transactions should be displayed on the screen before thecustomer initiates the transaction.

Advantages associated with WLAs:

A white label ATM may work in an area where real estate/ rental charges are very high

or in smaller centres where banks may not want to set up their own ATMs. It will

accelerate the growth and penetration of ATMs in the country.

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Although there has been about 30 per cent year-on-year growth in the number of ATMs

deployed in the country since 2008, ATM penetration on a per capita basis continues to

be less compared to other countries.

WLAs will assist in Financial Inclusion in the country.

Problems that may be associated with the WLAs:

While welcoming the RBI's move to allow WLAs to ensure penetration of the ATM

network in the country, bankers caution about the pitfalls customers could be

inconvenienced in case of failed transactions on WLAs as the dispute resolution

mechanism will involve three entities the WLA operator, the sponsor bank of the

operator, and the customer's bank.

Currently, in the case of failed ATM transactions, the customer has recourse to his bank,

though he may have transacted at another bank's ATM. Another issue that non-banks

setting up ATMs could face is whether a customer would be ready to pay charges fortransacting on WLAs.

Except in the US, in all markets that allow white label ATMs, the share of such ATMs is

no more than 25 per cent of the entire ATM network. They are always complementary to

bank ATMs.