2019 is going to be a ‘upgrade or replace’ year for ATMs as banks clamour to meet the various regulatory mandates and deadlines. Banks have already started replacing their older ATMs and upgrading ATMs that have been recently installed. It will be a good year for ATM OEMs since they will get multiple replacement or part/application upgrade orders from banks across the country. Their field service teams are going to have their hands full in upgrading or replacing ATMs.
Come February 2019, it will become imperative for the cash logistics companies to comply with the MHA guidelines on cash movements and RBI guidelines on networth. Some of the smaller players have already communicated their intent to exit the ATM replenishment business due to their inability to garner the necessary capital support. The country will therefore see an oligopolistic situation, with only four or at best five entities making the cut. These entities have already indicated their requirement of increase in charges for cash replenishment activities.
For the managed service providers, the first quarter of the year is likely to be a struggle to get reimbursement from the banks for upgrade activities on the one hand and getting the OEMs to replace or roll out the EMV and logical security upgrades on their ATMs, to meet the regulatory deadlines. The recalcitrant cash logistics agencies refusing to support them for replenishment activities will add to their woes. Higher downtimes and resultant penalties are highly likely. Some of them are likely to shut down their unviable ATMs if they do not get compensated.
Cash loading in ATMs using the ‘cassette swap’ method will be piloted in one or two cities in the first quarter. It remains to be seen whether all banks, service providers, OEMs and cash logistic companies will come together for the pilot or whether it will be led by one or two large banks, for their ATMs only. The success or failure of the pilots will determine whether cassette swap method will be rolled out on all the ATMs across the country or not.
For the White Label ATM operators, the increase in cost of operations due to regulatory compliance, will lead to them pruning down their operations to only those ATMs that give them some decent returns. Increase in interchange, especially for their ATMs in rural areas, is the need of the hour.
With the general elections likely in the second quarter of the year there is likelihood of shortage of cash supply and restrictions on movement of cash. This will impact the cash supply to the ATMs and the revenue of the ATM service providers and WLAs whose revenues depend upon the number of transactions on the ATMs. Banks will ‘insource’ or hand their branch ATMs to their own staff to perform cash replenishment activities, in order to save on the high replenishment cost. It would remain to be seen however, as to the impact of the same on downtimes and cash outs, especially on weekends and bank holidays.
In the second half of the year, the situation will stabilise on a reduced number of ATMs that will see long queues and increased usage due to increase in issuance of debit cards.
FIS™ is the worldwide leader in Financial Technology software, services, and solutions. FIS is a Fortune 500 company and is a member of Standard & Poor’s 500® Index. Headquarted in Jacksonville, USA, FIS serves more than 20,000 clients in over 130 countries, with technology that powers billions of transactions annually that move over $9 trillion around the globe.
[This is an authored article by Radha Rama Dorai, Managing Director – ATM & Allied Services, FIS. All views, opinions and expressions are personal and limited to the author.]