White Label ATM

A White Label ATM (WLA) refers to an automated teller machine set up, owned, and operated by non-bank entities. Unlike traditional bank ATMs, which are operated by financial institutions for their customers, WLAs are deployed by private companies or non-banking financial organisations that provide ATM services to the general public on behalf of multiple banks. In India and several other countries, white label ATMs play a crucial role in expanding banking accessibility, particularly in semi-urban and rural areas where bank branches and ATMs are limited.

Concept and Definition

A White Label ATM operates under a business model in which a non-bank company establishes and maintains ATMs but does not directly conduct banking operations. The transactions carried out at such ATMs are authorised through a sponsoring bank or payment network such as the National Financial Switch (NFS) in India. These ATMs allow cardholders of any bank to perform basic financial transactions, including cash withdrawals, balance enquiries, fund transfers, and mini statements.
The term “white label” signifies that the machine does not carry the branding of any specific bank. Instead, it displays the logo of the operating company. The back-end transaction settlement is handled through existing interbank networks, ensuring seamless connectivity between the customer’s bank and the ATM operator.

Background and Regulatory Framework

The concept of WLAs was introduced in India by the Reserve Bank of India (RBI) in 2012 with the objective of enhancing financial inclusion and increasing the reach of banking services. Prior to this, only banks were permitted to deploy ATMs. However, given the slow expansion of ATM networks in remote areas, the RBI allowed non-bank entities to enter the market through licensing arrangements.
According to RBI guidelines:

• Only non-bank entities authorised under the Payment and Settlement Systems Act, 2007, are eligible to operate WLAs.
• Such operators must have a minimum net worth as prescribed by the RBI.
• Transactions conducted through WLAs are routed through a sponsor bank, which is responsible for cash management and settlement.
• WLAs cannot accept deposits or provide credit services; they can only offer permitted transactions such as cash withdrawals and balance enquiries.

Companies such as Tata Communications Payment Solutions Limited (branded as Indicash), Hitachi Payment Services, and Muthoot ATM India have emerged as prominent White Label ATM operators.

Functioning and Transaction Process

The functioning of a White Label ATM involves collaboration among multiple entities:

1. Customer Initiates Transaction: The cardholder inserts a debit or credit card into the ATM.
2. Network Routing: The request is transmitted through the National Financial Switch (or equivalent network) to the cardholder’s bank.
3. Authorisation: The bank authorises or declines the transaction based on the customer’s account balance and other parameters.
4. Settlement: Upon authorisation, the operator disburses cash (supplied by the sponsor bank), and the transaction is settled between the operator, sponsor bank, and customer’s bank.

The service charges and interchange fees are shared among the WLA operator, sponsor bank, and card-issuing bank as per industry regulations.

Objectives and Benefits

The introduction of White Label ATMs was driven by several policy and developmental goals:

• Financial Inclusion: To provide easy access to banking services in rural and semi-urban regions where bank branches are scarce.
• ATM Penetration: To expand the ATM network without burdening banks with infrastructure costs.
• Technological Efficiency: To promote innovation and cost-effective ATM management through private participation.
• Customer Convenience: To ensure that customers of any bank can access cash and other basic services through a wider network of ATMs.

From an economic standpoint, WLAs have helped extend banking services beyond metropolitan areas, reducing the dependency on physical branches.

Types of Transactions Permitted

As per regulatory norms, White Label ATMs are authorised to perform only a limited range of transactions, including:

• Cash withdrawal
• Balance enquiry
• Mini statement generation
• Fund transfer between accounts of the same bankWLAs are not permitted to accept deposits, open accounts, or provide loan disbursals.

Revenue Model and Business Operations

The primary source of revenue for WLA operators is the interchange fee received from banks for each transaction. In India, banks pay an interchange fee to the WLA operator when their customers use the operator’s ATM. Additional income may come from:

• Display advertisements on ATM screens
• Co-branding partnerships with banks
• Value-added services such as bill payments and mobile recharges (if permitted by the regulator)

WLA operators also bear operational expenses such as cash replenishment, maintenance, network connectivity, and security. The viability of their business depends largely on transaction volumes and efficient cost management.

Challenges and Limitations

Despite their importance, White Label ATMs face several challenges:

• Low Transaction Volumes: Especially in rural areas, limited usage affects profitability.
• High Operating Costs: Expenses related to cash logistics, maintenance, and security reduce margins.
• Regulatory Constraints: WLAs cannot offer deposit or credit services, limiting revenue potential.
• Dependence on Sponsor Banks: Coordination with banks for cash management and settlement can create delays and operational bottlenecks.
• Infrastructure Issues: Connectivity and power supply shortages in remote areas hinder performance.

Policy Initiatives and Developments

To promote the deployment of WLAs, the Reserve Bank of India has implemented several supportive measures, including:

• Relaxing the number of mandatory installations in rural and semi-urban areas.
• Allowing operators to provide additional services such as bill payments, Aadhaar-based authentication, and cardless withdrawals.
• Encouraging interoperability through the Unified Payments Interface (UPI) and the Bharat Bill Payment System (BBPS).