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Light brigade charge: Mapping the rise of the micro-ATM channel | Financial News
“We want to be the Blinkit of cash delivery,” says Suneel Aiyer, mentor and advisory board member at PocketATM. Its business model: putting idle cash in kirana cash registers back into play. Suppose you want Rs 2,000 in cash, you display a QR code at the point of sale; your account is debited and the money is delivered. A corresponding credit entry is made to the merchant’s account. The clever part here is not PocketATM’s idea, but that it realized and seeks to bring to life a long-forgotten circular issued by the National Payments Corporation of India (March 16, 2020): ‘Withdrawal of cash above UPI at places of traders’. Aiyer, the former CEO of Writer Safeguard (a cash logistics company since acquired by Hitachi Payments), wants to “hyperlocalize cash in circulation (CiC) and increase its velocity; and reduce logistics costs by eliminating the need to send money to banks for sorting and grouping in the case of ATMs.”
This draws attention to micro-ATMs: devices similar to point-of-sale (PoS) terminals used by banks’ commercial correspondents (BCs); think of them as miniaturized portable ATMs. “The biggest advantage of micro-ATMs is that they not only take care of the issue of low ATM penetration, but CiC is recycled faster. Although we are not in this business, we facilitate indirectly in the case of retailers who are BCs”, says Ketan Patel, CEO of Mswipe Technologies (the largest implementer of PoS units). It also happens to be a trade that is largely below the radar as it is not glamorous.
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According to Dilip Modi, founder and CEO of Spice Money (one of the largest providers of assisted withdrawal services across 244,000 villages and semi-urban areas, serving over 100 million customers annually), demand for withdrawal services remains robust. . As for awareness, it exists in rural and semi-urban areas (due to limited availability of ATMs and high demand for cash). This is not the case in urban areas due to the wide acceptance of UPI, “and the lack of merchants providing these specific services. Our focus continues to be on bridging the awareness gap and expanding our services to ensure greater financial inclusion,” says Modi.
Uses of Micro-ATM
Among the many types of transactions that micro-ATMs perform, they largely allow account holders to withdraw and deposit money (through BCs) using Aadhaar and biometric authentication without visiting bank branches or ATMs. A matter of detail: in the case of withdrawals and deposits via micro-ATMs; the money is handled by the BC (it does not leave the device). This is authorized in four ways: via a different type of transaction identifier on PoS terminals; PoS terminals enabled for Aadhaar-enabled payment system (AePS) through biometric authentication; micro-ATMs or via UPI QR.
How big are the volumes? The latest available data from the Reserve Bank of India (RBI) says that Rs 22,804 crore was withdrawn in May 2024 through 1.562 million micro-ATMs across 87.979 million transactions. This compares to Rs 2,60,240 crore withdrawn through 2,60,000 ATMs (516.641 million transactions). Now, monthly cash withdrawals through ATMs are almost eleven times the volumes pushed through the RBI’s portable micro-ATMs, but keep in mind that the latter is capped at Rs 10,000 per transaction (higher amounts are decided by individual banks).
There is also a technical aspect to highlight here. The Rs 22,804 crore in micro-ATM withdrawals only capture “outside us” cash withdrawals. That is, say, you are a direct benefit transfer (DBT) beneficiary with an account at State Bank of India (SBI) and you are supposed to withdraw Rs 2,000 through a micro-ATM of a BC onboarded by another bank, such details is captured. But if it is through SBI’s BC (an “on-us” transaction), then it is not like that. Industry sources are of the opinion that if “outside us” and “inside us” transactions were included, the amounts involved would be much higher; and even more so if money deposited through micro-ATMs (for which there is no RBI data) is considered.
The growth of micro-ATMs must be seen in the context of what is happening in the legacy ATM market. You have 260 thousand ATMs; and after a pause, requests for proposals submitted by banks show an order book of 44,500 units. This number is significant: in November 2016 (at the time of demonetization), we had around 225 thousand ATMs; the numbers dialed are higher than those released since.
While micro-ATM withdrawal is not a 24/7 offering (it needs a human interface), it has the potential to shape the ATM channel. The reason why the ATM order book has been buoyant recently is that an interchange rate hike is just around the corner: from Rs 17 to Rs 20. Amit Jain, COO, Fino Paytech, says the interchange rate for micro-ATM withdrawals is not at par with the ATM industry, which rightfully underwent a revision from Rs 17 to Rs 15 and there are currently discussions to increase it further. “However, the average interchange rate for micro-ATM withdrawals is Rs 9 to Rs 10 and this needs to increase for the business to be sustainable.”
Review prices
Cash-in, cash-out (Cico) is the basis of central banks’ earnings. It accounts for over 60 per cent of their revenue, but there has been no revision in pricing in the last decade. “The government should consider a 50 basis point increase in transaction fees. A comprehensive costing exercise should be undertaken to determine the optimal transaction fee that supports the sustainability of agent banking,” says Seema Prem, co-founder and CEO, FIA Global.
It is essential to reevaluate prices to keep access for DBT beneficiaries functioning. “The mandate to update Aadhaar biometric devices involves a substantial cost to the BC industry, nearly Rs 600 crore if all 4 million Aadhaar biometric devices were replaced,” points out Anand Kumar Bajaj, Founder-Managing Director and CEO, PayNearby. He adds: “This would put financial inclusion initiatives and the industry under tremendous viability pressures.”
You ask Bajaj how he arrived at 4 million devices when the RBI data refers to 1.562 million micro-ATMs, and he says, “The 1.562 million units are monthly active devices, but if you add those that are active quarterly, there are around 3.2 million. . Add the least active ones and it comes to 4 million devices.”
The micro-ATM business should not be taken lightly.