Hughes Communications India Ltd.’s Sept. 26 announcement that it had received approximately 5,000 orders since January to set up satellite terminals suggests deployment of so-called “brown-label” ATMs is becoming a growing trend in India.
Brown-label refers to ATMs deployed and managed by vendors hired by banks, which continue to manage the machines’ network connectivity and cash-handling responsibilities. All 5,000 of the Hughes orders were from ATM vendors, according to a company press release.
Hughes is providing the machines, commonly known as Very Small Aperture Terminals, or VSATs, to such providers as AGS Infotech Pvt. Ltd. and Prizm Payments Pvt. Ltd., says an official at Hughes who requested anonymity.
Both AGS Infotech and Prizm Payments received a contract from Mumbai-based Axis Bank Ltd. in 2010 for the management of its 5,500 ATMs.
Banks are looking at ATM outsourcing as a cost-effective way to expand their operations, especially into suburban and rural India, which traditionally have been neglected when it comes to ATM deployments, the official says.
With outsourcing, banks save on the initial capital investment of the location rental and hardware costs, while the vendor earns a fee from the bank each time customers make a withdrawal, he adds.
More and more banks are going to outsource their ATM management, including HDFC Bank Ltd. and ICICI Bank Ltd., the official says.
“We expect our business to shift from working directly with banks to working with ATM vendors,” he says. “Even big vendors like Diebold [Inc.] are now open to this business model.”
Indian banks deploy about 75,000 ATMs, but they are unable to cover even 50% of the country’s population, a major portion of which lives in smaller towns and villages, according to data from the Reserve Bank of India. At least twice that number of ATMs still is needed to provide a majority India’s population access to the machines, the central bank contends.
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