ATM Business

C: Could you please share some information about the operations of the ATM business – pan India or otherwise and if the issue is concentrated on some particular region / ATM.

I: The operations are pan India and the losses are being incurred cumulatively from all regions.

C: Is the client facing this issue for quite some time or is it a recent phenomenon, perhaps due to the pandemic and people avoiding ATM use?

I: The client has been facing this problem over the last few years. You may consider a general scenario.

C: Could you also shed some light about the model. Since we are dealing with a bank that is making losses, I think it is going to be a Brown Label ATM with the banks doing the cash management and the technology part being outsourced.

I: Yes. The machines are manufactured by a technology company and the ATMs are sponsored and branded by the client.

C: Sure. I’d like to know if all banks that are following this model facing the issue or is it specific to the client.

I: No. It is specific to our client.

C: Alright. In such ATMs a multitude of services are usually available – from cash dispensing, deposit, bill payments etc. Do we have a particular focus here?

I: Lets stick to the money dispensing operation only.

C: Sure. I’d like to explore the problem through the revenue and cost approach. Should I focus on any of these two first?

I: Yes. Let’s look at the costs front as the revenues are similar across the industry.

C: Typically, costs at these ATMs might be classified into Contractual costs (with the provider: contract terms, payment schedule etc.), operational (electricity, transport, security), certain fee-based charges and penalty-based charges for prolonged cash outs.

I: Okay. How do you interpret the fee-based charges?

C: It could be related to the amount of transactions, perhaps the bank’s cards are being used at ATMs of other banks or customers getting benefits of directly swiping the cards at PoS machines rather than cash.

I: Alright. So, the matter is that the bank’s cardholders don’t seem to be withdrawing money from our ATMs but swipe the card at an ATM of another bank. This results in the client having to pay a transaction fee to the other bank thus affecting the bottom line. Why don’t you explore the possible reasons for this.

C: Sure. First, this could be due to the no: of ATMs may be insufficient, meaning customers are using our cards but at ATMs of other banks. Second, even if the no: of ATMs are sufficient, they may not be strategically located. So, customers are unable to find an ATM in their vicinity. Third, could be a history of cash outs / improper cash dispensing because of which customers are not too keen on using the client’s ATMs.

I: Okay but the location factor is not a problem. It appears that the problem could be because of some issues with the machines. Can you elaborate on those lines.

C: It could be due to a history of having defunct machines, or a connectivity to the bank’s network that has led to cash not being dispensed at our ATMs. It may also be due to the fact that the machines operate by sucking in the card and fail to return thereby causing hassle to the customers and them going to other ATMs.

I: Alright. The issue is indeed due to the malfunctioning machines. Please summarize the case now.

C: Our client seems to be facing an issue where the ATM business is incurring losses. The main reason behind this is the transaction fee that the bank has to pay to other banks when customers use ATMs operated by others.

Given the location of the ATMs not being an issue , it may be concluded that the malfunctioning machines have been a reason for customers switching to other ATMs.

I: Alright then. We may close the case now. Thank you.

C: Sure. Thank you so much.