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Introduction
There is a good chance you have walked past a standalone ATM tucked between a grocery store and a mobile repair shop, pulled out some cash, and never wondered who actually owns that machine or how they stay in business. In India, a growing number of these off-site ATMs are not run by banks at all. They are operated by private companies called White Label ATM Operators, or WLAOs, like Tata Communication Payment Solutions’ Indicash and India1 Payments. These companies entered the market about a decade ago with a simple promise to the Reserve Bank of India. They would take on the heavy costs of setting up and running ATMs, expand into areas that banks found unprofitable, and help bring banking services to millions of people who had none. But today, half the players who entered this business have already quit, and the ones remaining are asking the RBI for something simple. More money per transaction.
How ATMs Actually Make Money
When you swipe your debit card at an ATM that does not belong to your bank, your bank pays a small fee to the operator of that ATM. This fee is called the interchange fee, and it is the primary way WLAOs earn revenue. The problem is that the first 3 to 5 transactions you make at any ATM each month are completely free for you, meaning the ATM operator earns nothing from those swipes. They only start making money after you cross that threshold. In 2012, when WLAOs first entered the market, they earned 15 rupees per financial transaction. By 2021, that figure had barely moved to 17 rupees. On the other side of the equation, a 2019 RBI report estimated that keeping a single ATM running costs about 60,000 rupees every month. That means an operator needs at least 20 rupees per transaction, including non-financial ones, just to break even. The math has never worked in their favour, and it keeps getting worse.
Rising Costs and the Squeeze
Several forces have been pushing costs higher for ATM operators in recent years. Since the last interchange fee hike, the RBI raised interest rates by 2.5% to combat inflation. That might sound like a macroeconomic detail that has nothing to do with ATMs, but it hits WLAOs directly. The cash sitting inside an ATM is part of the operator’s working capital, money they often borrow from banks to keep their machines stocked. Higher interest rates mean higher borrowing costs, which means loading cash into ATMs has become significantly more expensive. On top of that, rent for ATM locations and fuel costs for the vehicles that transport cash have both climbed steadily. And the RBI has introduced a new security requirement that adds even more to the bill. Currently, cash is loaded into ATMs by personnel carrying sacks of notes, an operation that requires heavy security. The RBI wants to replace this with a contactless cassette-swapping system where locked cassettes with embedded chips are simply swapped in and out. It is more secure, but each cassette costs nearly 15,000 rupees, and procuring them at scale is a significant financial burden for operators already struggling to stay afloat.
The Story of a Shrinking Industry
When the RBI opened the doors to private ATM operators in 2012, the idea was elegant. Banks were finding it unprofitable to maintain ATMs, especially in semi-urban and rural areas where debit card usage was low. Financial inclusion was under threat because people in these regions had no convenient way to access their money. WLAOs were supposed to solve this problem. They would bear the capital costs, handle the security, manage the cash logistics, and expand the ATM network into areas banks had abandoned. For a few years, it seemed to work. But the number of players in the segment has since halved. Companies discovered that the revenue model simply could not support the expenses. The ones that remain, like Indicash and India1 Payments, have been repeatedly nudging the RBI to raise interchange fees. There has been recent chatter that a hike might finally be on the table, but nothing has been confirmed yet.
Possible Solutions Beyond a Fee Hike
Raising interchange fees is the most obvious solution, but it is not the only one. Nearly 70% of India’s 2,60,000 ATMs, both on-site and off-site, are machines that only dispense cash. If operators installed machines that could accept deposits too, the deposited money could be recycled for withdrawals. This would reduce the number of costly cash-loading trips operators need to make. There is also the question of borrowing costs. WLAOs typically access working capital loans at MCLR-linked rates, which is the minimum rate below which banks cannot lend. As of March 2024, the average MCLR sits above 8.5%, while the RBI’s repo rate is lower at 6.5%. An RBI committee back in 2020 had suggested letting WLAOs borrow at repo-linked rates instead, which would meaningfully reduce their operating costs. But that recommendation has not been implemented yet. The details of MCLR and repo rate mechanics are outside the scope of this post, but the key takeaway is that cheaper borrowing would give these operators some breathing room without requiring customers to pay more.
Final Thoughts
The humble ATM feels like a relic in the age of UPI and digital wallets, but for millions of Indians in smaller towns and villages, it remains the only reliable way to access cash. The companies that keep these machines running are caught in an uncomfortable position. Their costs keep climbing while the fees they earn have barely moved in over a decade. Something has to change, whether it is higher interchange fees, cheaper borrowing, or smarter machines that recycle cash. The next time you pull a few hundred rupees from a standalone ATM on a dusty street corner, remember that someone is losing money so you can have that convenience. And they have been asking for a raise for a very long time.