Article

Wallace Jacob
Sr. Asst. Prof., Tolani Maritime Institute, Talegaon Dabhade, Pune, Maharashtra

Automated Teller Machines: A Business Model

Introduction
John Shepherd-Baron is credited with
inventing worlds rst automatic cash
machine. The rst automatic teller machine
was installed at a branch of Barclays Plc in
a north London suburb on June 27, 1967.
While cash vending machines were once
a novelty, they have now become a part
of everyday life. There are now more than
1.7 million ATMs across the globe, according
to the ATM Industry Association[1]. As
of November 2011, according to National
Payments Corporation of India, the total
number of ATMs in India stood at 86,793.
The ATM industry in India is projected to
witness a CAGR of over 18% by 2013[2],
and India needs one million ATMs[3]. The
national average on each ATM being
260 transactions per day[4], of course,
depending on the location as well as
the bank.
From the early ATMs (also known
as Automated Banking Machines ABM,
cash machine, cashpoint, cashline, hole
in the wall) which could only accept cash
deposits, the functionality provided by
ATMs has shown enormous changes. It
may not be an exaggeration to say that
ATM is a mini-bank in itself. In Japan, the
ATMs can accept deposits of notes and
coins, sort the accepted currency, and
issue the currency to new customers,
thus requiring only occasional topping
with more money[5]. It is only a matter of
time when such features will be available
in the ATMs of our country. With the
number of services being provided by
ATMs increasing, it is envisaged that the
use of ATMs should see an increase. From
the concept of ATM owned by banks, the
world has moved to Brown-Label and
White-Label ATMs. This article explores
the concept of Brown-Label and WhiteLabel ATMs.

Brown-Label ATMs
Traditionally ATMs were owned by banks.
In a brown-label ATM, the hardware

as well as lease is under the ownership

of a service provider and not under the
ownership of a bank. The connectivity,
cash handling and management are the
responsibilities of the sponsor bank. The
ATM is named under the brand of the
sponsor bank but the ATM machine is not
owned by the bank. The owner of the ATM
machine would receive a fee from the
bank whose ATM card is used.
On September 26, 2012, Hughes
Communications India had issued a
statement that it would set up 5000
brown-label ATMs in the country[6]. This
indicates that there is a market for brownlabel ATMs.

White-Label ATMs
White-label ATMs (or WLAs) are the
ATMs deployed by third parties who
make their machines available to bank
customers and earn money through per
transaction charge. The Reserve Bank
of India has decided to allow whitelabel ATMs[7] which can be set up in
residential complexes, hospitals, bus
stops, railway stations, etc. This implies
that the business of buying and setting
up ATMs is now legal. White-Label ATMs
thus help in bringing technology to the
masses (penetrating the rural areas),
ensuring transparency and enabling rapid
transformation. According to RBI rules,
the money in the ATM will belong to the
bank; the vendor or owner of the ATM will
maintain the set-up and get a commission
on each transaction.

Scope
ATMs are sold by Ezee Rupee a Canadabased ATM manufacturing company. How
much does an ATM cost? This depends
on the type of ATM a person wishes to
purchase. For instance, Class 1 Armored
ATMs, Indoor ATMs, Through-the-wall
ATMs, etc. are available. A good ATM
with colour screen can be purchased
in the range of Rs. 3 lakhs to 3.5 lakhs[8]
(shipment costs excluded). A space

It may not be an exaggeration to say that ATM is a mini-bank in itself.

In Japan, the ATMs can accept deposits of notes and coins, sort the
accepted currency, and issue the currency to new customers, thus
requiring only occasional topping with more money.

of sixteen sq feet may be required for

installing an ATM. The maintenance of an
ATM may be around Rs. one lakh every
month including electricity and security
costs. If on an average a person withdraws
Rs. one thousand a day, and the ATM
owner gets 2% of the transaction, then
assuming 260 transactions per day over
a period of 30 days the overall revenue
works out to Rs. 1,56,000, indicating a
prot of nearly Rs. 56,000/- per month.
Over a period of nearly three years the
owner of the ATM will be able to cover
his initial investment (investment on land,
building, purchasing the ATM machine,
transportation charges). There can be a
few days such as weekend days, festival
days, etc. when the ATM transactions
might be more than the number of
transactions on other days of the week.
The owner of the ATM can denitely earn
through the surcharge being levied on
each transaction and there can be users
who might use their credit card also thus
increasing the ATM owners revenue.
The idea of ATM can be replicated to
the disbursement of coins to members
of the public also. There have been many
instances when shortage of coins has
been reported from several pockets of
the country.
The latest developments in the
eld of ATMs include ATMs which can
help consumers in purchasing jewelry.
The product options are displayed on
the touch screen and the customer can
make payment through his/her credit/
debit card. Thus ATMs can be used for
several purposes.
Setting up an ATM can also provide
employment to at least two security
personnel, besides helping in earning
money through advertising.
In fact, the Government of India
can take measures for allocating ATMs
to nancially needy people who are
differently-abled or perhaps handicapped,
so that such people can have a source of
earning and be nancially sound.

Parameters Which can be Taken

into Consideration
Already having a business: If a person

already has a business, then he can make

use of the existing resources and realize

CSI Communications | December 2013 | 31

A digital wallet is a chip inside a cellphone that uses wireless neareld

communications technology. Money can easily be transferred using
the digital wallet technology.
an increase in his revenues. A person may
also start a business of selling, distributing
and servicing ATMs.
Population: Population density can be

important while setting up an ATM. A

higher density might help in more usage.
Per capita income: The per capita income
varies from state to state and city to city
and sometimes within different areas of
the same city. It might be more viable to
set up ATMs in a city or a state or an area
with higher per capita income. Industrial
areas and IT hubs are some of the best
places to install ATMs. It might also be
feasible to set up ATMs at places were
urbanization is taking place. Educational
institutes, factories, departmental stores,
car parks, super markets, railway stations
and hospitals are some of the ideal places
where an ATM should be installed. This
would also help in reducing commuting
costs and alleviating traffic problems.
Risk: There have been a few cases, in cities

like Pune, Gurgaon and Noida, where

ATMs have been stolen. Therefore an
ATM might require more add-on security
features, implying an increase in initial
investment and maintenance costs. There
have also been cases of a bank being
overtaken by other bank or a bank being
closed wherefore the ATM owner may
have to look for another bank willing to
hire his/her services.
Competition: e-wallets or digital wallets,

and the use of credit cards or debit cards

at merchant establishments, and online
banking, mobile banking being used for
payments or transfer of money pose a
signicant threat. As of date, there is less
competition in the ATM market. However,
the danger of competition from digital
wallets exists. A digital wallet is a chip
inside a cellphone that uses wireless neareld communications technology[9].
Money can easily be transferred using
the digital wallet technology. The digital
wallet is already in wide use in Japan and
may soon spread to other countries.
Penetration Levels: India still has a long

way to go in terms of reaching the levels

of ATM penetration in other emerging

markets such as China or Korea. While

China has close to 85 ATMs per million
people, India has only about 62 ATMs
per million people. As reported in RBRs
Global ATM Market and Forecasts 20112016 in the Asia-Pacic region during
2010, China saw the greatest absolute
growth with the addition of 57,000 new
ATMs (growth rate of 26%). The second
largest absolute growth was in India
where the installed base grew by 15,000
machines (growth rate of 26%)[10].
Education: A new course on ATM Dangers
and Risks, needs to be introduced which
educates about possible scams which
might be carried out through ATM. It
might become as big a market as the
cellphone market or the computer games
development
market.
Entrepreneurs
utilizing the idea of owning ATMs can also
start such courses which can be a means of
further earnings and spreading awareness.
Future research: It is possible that in the
near future ATMs might be developed
which might even keep track of the
identication number printed on currency
notes. If such developments take place
then the menace of counterfeit notes
might be handled to a large extent. There
have been cases where ATM users have
claimed that they retrieved counterfeit
notes from an ATM and the bank refutes
such claims. It is also possible that the
manufacturers might be able to produce
more cost-efficient ATMs in the days to
come. There also is a possibility of shift
to the wireless system in which case the
cost of maintenance of ATMs is likely to
come down and the process of installation
might also become simpler. Scientist
at a Delhi based Institute for Genomics
and Integrative biology have introduced
a credit card-sized health data card that
enables access to a card-holders genetic
information[11]. The capability to read from
a health-card is likely to be integrated
with the already existing capabilities of
an ATM. With such developments more
number of ATMs will be required.
Theft of ATM: It is possible that some
insolvents might cover the CCTV camera
and steal the ATM. For instance, an ATM

CSI Communications | December 2013 | 32

of the United Bank of India weighing about

800 kg and containing Rs. 7.60 lakhs was
stolen from Chikhli, Pune on 04 July 2011.
On June 28 2011, an ATM of ICICI bank
located at Chakan was stolen and on
October 27, 2009 a gang of suspects had
stolen the ATM of Union Bank of India[12].
Cloning: There have been cases of card-

cloning rackets[13]. ATM owners will

have to take special precautions to avoid
cloning of cards.
Global ATM Alliance: refers to a joint
venture of some of the giant international
banks which allows their customers to
use their ATM cards at the ATMs of other
banks in the list without having to pay an
International ATM access fee. Owning
ATM of a bank which is part of the Global
ATM Alliance might be more lucrative.
New ATMs: A new EcoATM has been

developed with a receptacle where a

mobile can be placed. The ATM has a
camera which takes pictures of the device.
The user can also connect the device to
the many cables provided with the ATM
so that the machine can gure out if the
handsets internals are working. When
the analysis is complete, the ATM gives
a quote on the spot, based on what a
network of hundreds of electronicsrecycling companies are willing to pay for
it[14]. Based on the number of handsets in
use nowadays, purchasing the EcoATM is
a viable proposition.
Limitation: There is a lot of bureaucracy
and the play of power and politics which
may act as deterrent to people who make
want to adopt the ATM business model.

Conclusions
Owning an ATM can be protable in a
cash-dominated country like India. If
the number of successful transactions
per day exceeds three hundred and each
transaction is of more than Rs. 1000/the owner should be able to beak-even
in three years time as per the current
study. The total ATM cards issued in
India are estimated to grow at a 4-year
CAGR of 22.7% to reach 672.9 million in
2015, according to the AM Mindpower
Solutions report[15]. With the number of
ATM cards increasing every year and also
the ATM being put to more and more uses,
such as purchasing jewelry, EcoATM,
etc discussed above, it might be fruitful
proposition to own a White-Label ATM.

www.csi-india.org

References
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About the Author

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ATM Inventor passes away at 84, The

Times of India, May 21, 2010, pg. 17.
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25, 2013, 1110 hours.
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2010, pg. 1.
Gupta Suchandana, Man buys ATM on
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2010, pg. 10.
Shroff F T, Modern Banking Technology,
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http://www.thehindubusinessline.com/

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n

Wallace Jacob is a Senior Assistant Professor at Tolani Maritime Institute, Induri, Talegaon-Chakan Road, Talegaon
Dabhade, Pune, Maharashtra. He has contributed articles to CSI Communications especially in the Programming.
Tips section under Practitioner Workbench.

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