White-label ATM

White-label ATM: The concept of white-label ATMs facilitates collaboration between non-banking entities and traditional banks. These ATMs are designed to be interoperable, meaning customers from various banks can use them for transactions. This interoperability enhances accessibility and convenience for users, especially in areas where traditional bank-branded ATMs may be limited.

What is a White-label ATM?

A white-label ATM (Automated Teller Machine) is a type of ATM that operates without displaying the branding of a specific bank or financial institution. Instead, it is run and managed by non-banking entities known as White Label ATM Operators (WLAOs), which are authorized by regulatory authorities like the Reserve Bank of India (RBI) in the Indian context. Development of the rural areas has been an important topic across the government. This upliftment is crucial for the Indian economy as the majority of the Indian population still lives in rural areas. Even though there are stats that support this statement, according to a report from the World Bank 64.61% of the working Indian population comes from a rural background. Rural India contributes to almost 50% of the total GDP making it a significant domain to serve by financial institutions. To speed up the process of development, there is a strong need to make financial services readily available at an affordable cost. To cater to this issue, the government is ensuring the delivery of financial services such as bank accounts, low-cost credits, financial advisories, and insurance services. Earlier, banks had limited reach towards rural areas and this area lacked getting proper attention from banks and financial institutions in order to provide basic banking facilities. As per RBI, more than 70% of active ATMs are located in urban areas. In order to facilitate the stagnant distribution of ATM service, RBI came up with the concept of White-label ATMs.

Features of White-Label ATM

White Label ATMs, operated by non-banking entities, offer neutral branding, promoting collaboration among multiple banks. With shared infrastructure, extended reach to rural areas, and regulatory oversight, White Label ATMs contribute to cost-effective, inclusive banking services. The features of White-Label ATMs are:

• Operated by Non-Banking Entities: White-label ATMs are typically operated by non-banking companies, often referred to as White-label ATM Operators (WLAOs). These entities are authorized by the Reserve Bank of India (RBI) to deploy and operate ATMs.
• No Bank-Specific Branding: Unlike traditional ATMs that prominently display the branding of a specific bank, white-label ATMs have a neutral or generic appearance. They do not carry the name or logo of any particular bank.
• Sponsor Bank: While white-label ATMs are operated by non-banking entities, they are associated with a sponsor bank. The sponsor bank is responsible for the financial aspects of the ATM, including cash replenishment, maintenance, and regulatory compliance.
• Interoperability: White-label ATMs are designed to be interoperable, meaning that customers from various banks can use these ATMs to conduct transactions. This promotes financial inclusion and convenience for users who may not have an account with the bank operating the ATM.
• Shared Infrastructure: The concept of white-label ATMs allows for the shared use of ATM infrastructure. Different banks can collaborate with a single white-label ATM operator to extend their ATM network without having to invest in additional ATMs themselves.
• Expansion of ATM Reach: White-label ATMs contribute to the expansion of the ATM network in regions where traditional bank-branded ATMs may be limited. This is particularly beneficial in rural and remote areas where access to banking services may be limited.
• Increased Competition and Cost-Efficiency: The presence of white-label ATMs introduces competition in the ATM deployment market, potentially leading to cost efficiencies. It allows non-banking entities to participate in providing ATM services, reducing the burden on traditional banks to invest heavily in ATM infrastructure.

Reasons behind the Introduction of White Label ATM by RBI

The concept of White Label ATMs (WLAs) was introduced by the Reserve Bank of India (RBI) to address certain challenges and promote financial inclusion in India. The key reasons for introducing White Label ATMs include:

1. Expansion of ATM Network:One of the primary objectives was to expand the reach of ATMs, especially in rural and remote areas where traditional bank-branded ATMs were limited. By allowing non-banking entities to operate ATMs under the white-label model, the RBI aimed to increase the overall ATM network and make banking services more accessible to a larger population.
2. Encouraging Non-Banking Entities: The introduction of White Label ATMs encouraged non-banking entities, such as retail and technology companies, to participate in providing ATM services. This diversified the players in the ATM deployment market, promoting healthy competition and potentially leading to cost efficiencies.
3. Promoting Financial Inclusion: The RBI aimed to enhance financial inclusion by reaching areas where traditional banking infrastructure was inadequate. White Label ATMs were seen as a means to extend banking services to underserved and remote regions, empowering individuals in those areas with better access to financial services.
4. Interoperability and Convenience: White Label ATMs are designed to be interoperable, allowing customers from various banks to use them for transactions. This interoperability enhances customer convenience and reduces the need for individuals to search for ATMs specific to their banks.
5. Cost-Effective Approach: The concept of White Label ATMs offered a cost-effective approach to ATM deployment. Instead of individual banks investing heavily in expanding their ATM networks, white-label operators could manage and share the infrastructure, thereby reducing costs for all involved parties.
6. Encouraging Technology Adoption: The introduction of white-label operators encouraged the adoption of advanced technologies in ATM services. This contributed to the modernization of the ATM infrastructure, potentially leading to improved services and functionalities.
7. Regulatory Oversight: The RBI, as the regulatory authority, maintained oversight over white-label operators to ensure compliance with regulatory standards. This regulatory framework helped address issues such as interchange fees, revenue-sharing models, and security measures to safeguard the interests of both operators and consumers.

Objective of establishing White-label ATM

• Financial inclusion: Financial inclusion helps to develop a culture of savings in the segments of the rural areas, which has its role to cultivate overall economic development. Initiatives of financial inclusion include banks providing basic savings bank deposit accounts with facilities such as no minimum balance, withdrawal/deposit of cash, ATM facility, etc. to every account holder. White label ATMs helps in achieving this objective.
• Driving ATM penetration: ATM penetration in India doesn’t have satisfying figures, as per the data on a population base of 10lakhs there are less than 100 ATMs, whereas in USA the figure is 14 times that of Indian ATMs. The government in order to irradicate the issue has invited private players to enter this business domain to reach masses.
• Cultivating banking habits: White label ATMs are like mini banks, as they not only perform cash dispensing service but they also provide basic banking services like checking account balance, providing mini statements, payments of bills, cheque book request, etc. which will help the rural area to understand basic banking feature and connect them with mainstream banking services.
• Geographical reach: To ensure better geographical reach and financial inclusivity, keeping in mind the large population of the country. This was done to provide banking customer services all over the country and tackle the geographical adversities which was faced by banking sector as these private players are already in business line in such distant places and they understand the challenges and solutions better than the government.
• Encourage Non bank players: Government has introduced White Label ATMs to brought up and to ease the pressure on the public banks while giving the private companies a way to make profit out of the financial system, but with the end goal being betterment of the rural and semi urban region.
• Obtain FDI: Recently, the government has announced that there can 100% of FDI in establishing white label ATMs, this will allow foreign players to provide the ATM services in India, and customer can get better options and better service.

White-Label ATM operator in India

Initially there were 8 private entities who entered the White Label ATM business, out of which as of now only four are operative. Following were the initial entities to open white label ATMs

• India1 Payments
• Hitachi Payments Services
• Tata Communication Payment Solutions (Indicash)
• Vakrangee
• SREI
• Muthoot Finance
• AGS Transact Technologies
• RiddhiSiddhi Bullion

Different types of ATMs which are available in India

• Brown Label ATM: ATMs where the hardware and the lease of the machine are owned by a service provider, but here the cash management and connectivity to banking networks are provided by the sponsor bank. They have the promoted with the branding of the bank.
• Orange Label ATM: ATMs provided for share transactions. are mainly used by investors and traders for buying and selling stocks and securities.
• Yellow Label ATM: ATMs are set up for the purpose of e-commerce transactions. These type of ATMs are mainly used by online shoppers and merchants for making payments and purchases.
• Pink Label ATM: ATMs monitored by guards whose responsibility is to ensure that only women access these ATMs. These type of ATMs are set up to provide safety and convenience to women customers.
• Green Label ATM: ATMs are provided for transactions related to agriculture. These type of ATMs are mainly used by farmers and rural customers for various banking needs.
• Online ATM : These ATMs are connected to the bank’s database all the time. In case on an online ATM, account holder can’t withdraw more than the balance in your account.
• Offline ATM: These ATMs aren’t connected to the bank’s database. In case of an offline ATM, account holder will be able to withdraw beyond the balance in his account in case it falls within the prefixed withdrawal limit but in such a case the bank may charge a penalty for the same.

Advantages of White-Label ATMs

The advantages of White Label ATMs (WLAs) are-

• Convenience to customers: Customers get benefited from White Label ATMs since it acts like a mini bank as it serves all the basic banking services like balance checking, cheque book requests, mini statements, etc. so there is no need to visit a bank branch on a regular basis
• Uninterrupted service: White label ATMs are available 24 hours a day, seven days a week, even including holidays which provides seamless services to customers.
• Benefits to bank: Banks gets benefited from white label ATMs because they do not have to maintain a huge staff and office space, as they would have to maintain in establishing there own ATMs, this helps to lowers their branch-operational costs.
• Financial inclusion: White label ATMs have penetrated the rural, semi-urban, and low-income people in terms of providing them with all the basic banking needs. This financial inclusion of rural people helps in overcoming economic adversities and creating awareness about basic banking framework.
• Flexibility: White label ATMs allows ATM cards to be issued by any bank that can be used at White Label ATMs, so there is no need to find any specific ATM which deals only there own customer base and account holders. People can transact with any white label ATM without the problem of penalty or transaction charges.
• Value added Services: White label ATMs not only provide cash dispensing services but they also provides and other value-added services like mobile recharge, energy bill payments, etc. which solves the basic transaction needs of rural population.

Disadvantages of White-Label ATMs

While White Label ATMs (WLAs) offer several advantages, they also come with certain disadvantages.They are-

• Tedious dispute resolution: The main issue in WLAs is unsuccessful transactions. In any event of a dispute, the dispute resolution method will be very complex as it include three entities, namely the WLA operator, the WLA operator’s sponsor bank, and the customer’s bank and this take a lengthy time and customer has to face this problem.
• Limited free transactions: Only a limited number of free transactions are permitted on the WLAs. WLAs charge specific fees from customers and Customers will be discouraged by the cost issue, as they will be obliged to pay a price to use the White Label ATMs
• Competition from bank operated ATMs: WLAs have still not managed to set a repute among the rural population as people still prefer transacting from bank-managed ATM. It i seen that in case there is WLA ATM and a bank operated ATM, then customers will prefer bank ATM and in such scenarios the White Label ATMs may not be able to generate a profit
• Financial Viability: White label ATMs’ financial viability is under question because of their low interchange charge and hefty operational expenses, for the same reason two of the eight entities to whom Certificate of authorization was issued, surrendered their COA as this didn’t turned out to be a profitable venture for private entities.

Conclusion

Government is taking a lot of steps for the financial inclusion of rural and semi urban population, and the idea to open more ATMs, in the form of privatized, non-banking entities has also proved to be a successful one. White label ATMs even though operated by private entities are keeping in mind that there primary objective is providing customer service and spread banking awareness among the rural population, and there incentives comes second. WLAs although not operated by banks but are regulated by RBI, and it makes sure that all the statutory and regulatory guidelines are followed by operators. As of now there are four major private entities who are managing the white label ATMs. States like Uttar Pradesh, Bihar, Madhya Pradesh, have seen a tremendous growth in establishment of WLAs. WLAs provide several value added services to customers, which helps to spread basic banking awareness among rural population. Government should make sure that the dispute resolution mechanism should be improved and the cost should be minimized so that people can prefer these WLAs without a second thought.

FAQs on White-Label ATM’s

1. What is the full form of WLA?

WLA stands for White Label ATMs

2. Whether WLAs are owned by banks?

No, WLAs are not owned by banks, they are owned by non banking entities. However, WLAs are regulated by RBI and private entities have to adhere to RBI guidelines.

3. When was the first WLA established in India? How many WLAs are established in India?

In June 2013, the first WLA was established in India by Tata Communications Payment Solutions (TCPS) in Chandrapada, a tier-V town near Mumbai. As per RBI there are about 36,000 WLAs operated in India.

4. What is the objective behind introducing WLAs in India?

The major objective of introducing WLAs is to establish ATMs in Tier III to Tier VI cities. WLAs are established to achieve financial inclusion of rural and semi urban population.

5. What is the allowed FDI percentage in WLAs?

As per the latest decision by government in consultation with RBI, they have allowed 100% FDI in WLAs, which will allow foreign entities to establish WLAs in India, which will help to serve larger customer base and will provide better options to customers

6. What are the services provided by the WLAs?

WLAs provide a wide range of services to customer ranging from providing Account Information, Cash Deposit, Regular Bill Payment, Mini / Short Statement Generation, PIN Change, Request for Cheque Book