Prior to 2001, the banks, in India, set up proprietary ATM networks to create brand differentiation & customer acquisition. New private banks like ICICI Bank, UTI Bank, IDBI Bank & HDFC Bank and multinationals like Citibank & StandardChartered Bank spearheaded this movement. When India’s first shared ATM network, Swadhan, was launched in 1997, in Mumbai, under the leadership of Indian Banks’ Association (IBA), these banks were initially reluctant to share their ATM networks. Swadhan was an idea whose time had not yet come. Swadhan was being managed by India Switch Company (ISC), a joint venture between ACI, Tandem, HMA Starware and Financial Software& Systems (FSS) using the Base24 transaction switch, which eventually closed down in December 2003.

But during these years, a handful of other banks, like State Bank of India (SBI), Andhra Bank, Federal Bank & Punjab National Bank (PNB) had set up their own ATM switches. Wider deployment of ATMs had established it as a channel for customer convenience, which made sharing of ATM networks a commercially viable proposition. Banks that owned a large number of ATMs saw an opportunity in the transaction-acquiring business that could contribute to more revenues per ATM deployed.

Whatever might be the commercial considerations for these numerous bi-lateral ATM sharing arrangements, these are not as convenient for customers as multi-lateral & branded networks. The largest among these multi-lateral networks is Cashnet, managed by Euronet India, which began with just three member banks, viz. Citibank, UTI Bank and IDBI Bank.

In addition to the above, there is CashOnline, for which Canara Bank is the settlement bank and other members are Central Bank of India, Indian Overseas Bank, UCO Bank & Union Bank of India. Most of these networks came into existence during the year 2003. The functionality of an ATM depends on the instructions, which the ATM gets from the switch. An ATM obeys commands from the switch, which is the heart of the network & ATM is only an execution & dispensing machine.

Euronet India was selected by the Institute for Development and Research in Banking Technology (IDRBT), the technology arm of RBI, to implement a National Financial Switch (NFS) in the country. NFS consists of both an integrated inter-ATM switch provided by Euronet India and an Internet & e-commerce payment gateway from Opus Software, which will act as an e-commerce facilitator to authenticate and route payment details between banks and various parties. The switch became operational in August 2004. This two-part solution is the first of its kind at the national level. ‘NFS will act as the mother of all ATM switches, and all other ATM switches in the country are expected to join it eventually,’ says Loney Antony, Mg. Director, Euronet Services India Pvt. Ltd. The settlement on NFS takes place through the RTGS system. It is expected to be a major step in building the financial infrastructure to allow connectivity for participating banks’ ATMs.

The SBI group has acquired the numero uno status in terms of ATM deployment in India; today it owns a network of ATMs, which is more than double of its closest competitor, ICICI Bank.

Both, SBI & ICICI Bank, have been following the policy of avoiding multi-lateral shared ATM networks and opting for bi-lateral arrangements. While SBI has reciprocal ATM sharing arrangements with UTI Bank, HDFC Bank, Andhra Bank, Indian Bank, PNB & Corporation Bank, it is not a member of any multi-lateral network, not even NFS.ICICI Bank has reciprocal arrangements with Andhra Bank & Federal Bank, but it was the first bank to join NFS. HDFC Bank, which recently joined Cashnet, has also been avoiding multi-lateral ATM networks so far and relying more on reciprocal arrangements.‘Bi-lateral sharing of ATM networks is more popular among banks in India and is likely to co-exist with various multi-lateral sharing arrangements,’ says Rahul Bhagat, Vice President, Direct Banking Channels, HDFC Bank.

Loney Antony holds the opposite view, saying ‘Multi-lateral shared networks will join NFS as a consortium and co-exist with it, but bi-lateral arrangements will disappear over time.’ The field is clearly unequal.....

The top 6 banks own almost two-thirds of the total ATMs deployed in India. In fact, the top three account for almost half of the market share. Multi-lateral sharing is seen to be more useful for banks having fewer ATMs.

S L Karandikar, General Manager, Dombivli Nagari Sahakari Bank Ltd, shares his views on the future of Kiosks in India & the multitude advantages associated with it.

In the race where banks strive to be recognized as “Progressive Bank”, offering seamless services to its customers, where does the value added service of Kiosks actually fit in?

DNS Bank is in the midst of implementing Core Banking Solution. We have made a path-breaking approach to CBS by sharing Data Center with another Pune based Co-op bank. In Indian banking history this is a first time that two banks have come together to share Data Center. This ‘progressive attitude’ also reflects in offering other delivery channels such as ATMs and CDMs. We are keen on offering round the clock automated services to our customers and CDMs are playing crucial role in this. The two CDMs that we have installed are being used by our customers in non banking hours also. In fact we have observed that many customers have used it to deposit cheques at late nights also.

How do you foresee the demand for Kiosks in India?

Such delivery channels will play very important role in future as the machines are user friendly and offers the customers flexibility of time in transacting with the banks. They are no more limited to banking hours for their transactions.

How do you foresee the demand and adoption of kiosks from a practical & technological perspective?

The Indian banking industry is undergoing a rapid change in adopting technology and providing new delivery channels. Though banks are providing channels such as ATMs & Kiosks, it will take some time for people to adopt faceless banking and interact only through machines. We are still in transition stage where a mix of human interaction and channels such as Kiosks will be necessary to offer efficient services to customers. In other words, what customers look for is ‘Machines with Human face’.

Are Kiosks, due its advantage of greater reach & wider installation alternatives, a more advanced means of promoting your products?

The kiosk results in a positive ROI as it saves manpower cost by reducing the counter personnel which otherwise is necessary. But as mentioned earlier it will not replace the humans entirely as still in semi-urban and rural areas people prefer human interaction instead of kiosk.

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