White label ATM (WLA) operators can survive economically only if the Reserve Bank of India (RBI) increases interchange fees to Rs 23 per cash transaction from Rs 17 currently, and Rs 8 for each non-cash transaction from Rs 6 currently, K Srinivas, MD & CEO of India1 Payments, the largest WLA operator, told FE.
“Currently, the interchange fees is grossly inadequate to cover cost, let alone making profit. So, we have been urging RBI, NPCI (National Payments Corp of India) and the finance ministry to reconsider this,” he said.
India1 Payments currently has about 13,000 WLAs, with almost 90% of them located in the semi-urban and rural areas (SURU). It aims to increase the number of WLAS to 25,000 in the next three to four years.
In order to diversify its revenue base, it is also looking to expand its scope of services by onboarding more customers onto its digital application. The digital application will offer loan leads, which will provide additional fee income to the company.
The company is also looking to set up “pragati centres” which will act on the lines of business correspondent (BC) model, wherein the payments company will offer loan and insurance leads through both online and digital channels.
Co-existence of cash and digital transactions
Contrary to popular belief that digital transactions are feeding into cash transactions, Srinivas shared data which said that out of a total of nearly 300 million Unified Payments Interface (UPI) users, the top 30% of “power users”, or 90 million-100 million power users, contributed to about 85% of total transactions, which meant that there is a long tail of people who use UPI but predominantly use cash for daily transactions.
On dhanteras this year alone, India1 Payments ATMs dispensed nearly Rs 500 crore of cash, higher than the Rs 400 crore on the same day last year.
“On one side, digital transactions continue to grow. If the average of four UPI transactions per month grows to six, you get 50% growth, which looks impressive. However, the fact is that a billion people continue to use cash,” he said.
Besides, India has fewer ATMs compared to the USA or Japan, Srinivas said. The country currently has a total of 260,000 ATMs, out of which metros and top-tier cities account for 50% of the share and SURU areas account for the rest, even though there are a total of 625,000 villages in India.
“This means we have only one ATM for four villages, which is not adequate,” Srinivas said, adding that in villages of Uttar Pradesh and Bihar, people have to travel about 8 kilometer (km) to 10 kms to access an ATM.