20 April 2014

Musings of a change agent

Mukesh Gupta - SAP India Pvt ltd

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Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Idea for disruptive innovation in Banks

26 February 2013  |  4504 views  |  5

There is a lot of discussions and activities around the revival of the good old ATM. 

Some are trying to make these machines more user centric like Wells Fargo

Some are trying to improve the overall user experience of the ATM like Diebold

However, the true question should be the following: 

"Do we even need an ATM? Is there a better, easier, faster way to manage cash than via an ATM?

The first bank to figure out the answer to this question has the potential to truly disrupt the banking industry from a cash management perspective. 

One way that I think could be used is the small businesses that accept payments from a credit or debit card? 

Can they not be used to function as a teller for the bank? The bank instead of charging a fee for the use of the card machine, can instead pay the business a nominal amount and convert them into cash dispenser.

All the technology that is needed to make this happen is already available. The only change is in the execution of the idea. 

This is just one idea to enable this. There could be many more viable ideas.. The question is are we looking for them? 

Do let me know your thoughts by posting your comments below or tweeting them to me at @rmukeshgupta. 



Comments: (9)

Christopher Mc Carthy - SunGard - Zurich | 28 February, 2013, 14:01

Shops and supermarkets in GB have offered a "cashback" service for years (15+?) - if you pay with a card (debit/credit), they will ask you if you want any cash at the same time...

Only way to pay money (cash, cheques) is to go to a physical branch of you bank however.

Mukesh Gupta - SAP India Pvt ltd - Bangalore | 28 February, 2013, 14:29

Thanks for your comment Christopher. I wasnt aware of this as in India, this simply does not happen..

If you want cash, you would need to either go to a bank or an ATM as the banks charge the vendor a processing fee for all the transactions being conducted with the card at the vendor, typically about 2.5% of the transaction value. Not sure if the same is also the practice in England or for that matter in Australia (As i also received a similar feedback, that shops do dispence cash at their counters). 

Also, the purpose of my post was not just to promote the idea of using this concept but also to question the reason why a bank should continue to invest in ATM's!

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 01 March, 2013, 19:38

Having used the cashback facility several times in supermarkets in the UK and never found it in India, cash disbursement via businesses won't significantly impact ATM count, let alone disrupt cash management, for the following reasons: (1) It hasn't done so in the UK where it has been around for a long time, probably because average ATM cash withdrawals are much higher than the 25 GBP ceiling placed on cashback (2) Most small businesses in India don't accept cards, so the question of using them to disburse cash when paying by cards doesn't arise in the the first place - in fact, it's funny how many times I've been told by such businesses to visit the nearest ATM, withdraw cash, come back and pay them by cash because they don't accept cards (3) Surely, cashback can be implemented in supermarkets in India but organized retail to which supermarkets belong amounts to less than 10% of total retail volumes in India compared to >70% in the UK, so cash withdrawal via cashback would be a mere drop in the total cash withdrawal ocean handled by ATMs in India.

Mukesh Gupta - SAP India Pvt ltd - Bangalore | 02 March, 2013, 03:44

Firstly, I would like to thank you for having taken the time to share your thoughts on my blog post.. 

As indicated earlier, the primary objective of the post was to raise a question - "Can banks think of a way to work without an ATM". 

The idea i suggested was only a spark to get the discussion going, which I am really happy that it has done. 

Also, regarding your comments the fact that the unorganized retailers in India not accepting cards - I think this is due to the fact that the entire business model is skewed in favour of the bank and the smaller retailers do not see much value in the offering. 

They need to pay rent for the card swipe machine, then there is a 2.5% charge on each transaction made via the cards. Then there is the hassle of keeping the signed charge slips safe and sending it to the bank and wait for the bank to transfer the funds to their accounts. 

If we could somehow make it more attractive for the retailer to use a card machine (I had suggested an idea in my earlier post). Once it is attractive for a retailer to accept cards, I am sure that this can still be explored.. 

Again, thanks for keeping the discussion alive! 

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 02 March, 2013, 17:48

The business model for card acceptance - POS rental plus 2-4% MDF / MSC - is almost the same all over the world. For many years now, merchants have been receiving their payments from banks on T+1. Only when a cardholder raises a dispute that a merchant have to show the signed chargeslip as evidence of the transaction. Besides, SQUARE-clones that obviate the need for a POS for accepting card payments have been around in India for over a year now. If small businesses still hesitate to accept credit cards in India, it's either because they still find cash to be the cheapest mode of payment or their customers are indifferent to paying by card or cash or, like their brethren elsewhere in the world, they want to have their cake and eat it too as I'd pointed out here. I hardly hold banks responsible for this situation. Anyway, coming back to the main topic, if banks cut down their ATM count and tell me to go searching around for a small business to pick up cash, I definitely won't like it.

Arvind Ronad - Fundtech - Bangalore | 02 March, 2013, 18:34

In India Reserve Bank of India has authorised banks to offer the facility of "Cash withdrawal at Point of Sale" , with or without purchase of merchandise, as early as in July, 2009. A few Public Sector Banks (Union Bank) have introduced this but with not much success. The limit of withdrawal here is INR 1,000/- per day.

Mukesh Gupta - SAP India Pvt ltd - Bangalore | 04 March, 2013, 02:43

Swaminathan - Thanks for keeping the discussion alive.. I would like to re-iterate again that I am not trying to advocate the idea about retailers replacing ATM's..

All I am saying is that before banks and ATM manufacturer's go in for an ATM refresh, in terms of design or implementation, it is worth questioning if there is a real need for an ATM or if the function of the ATM can still be addressed without having to invest significant amount of money on the infrastructure.

The answer could well maybe that we are not ready to do away with all the ATM and its network, but then we would have validated the fact after having put in a lot of thought and not because of 'habit'.

If that turns out to be the case, the next question that needs to be asked is if we do have the ATM network, what more could we do with it?

It is only by questioning & testing these assumptions will we be able to come up with significant or even disruptive innovations..

I can understand from your comments that you think that the ATM's are currently irreplacable. So, what more do you think we can do with these ATM's and their networks, apart from making them more easier to use ? Request you to do keep the conversation going.. 

Looking forward to hearing your comments.. 


Mukesh Gupta - SAP India Pvt ltd - Bangalore | 04 March, 2013, 02:50

Arvind - Thanks for sharing this information.. I was not aware of this information at all.. 

Do the banks still charge the merchant the same 2.5% for the card transaction for this withdrawal? If so, I can understand why this never took off in India... 

So, many times, we are afraid to let go of traditional ways of charging our customers that we could potentially miss out on a much bigger opportunity..

Is this one such opportunity for the banks? I think this is a question worth asking..

And thanks for keeping the conversation going.. That is what makes these communities tick...


Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 04 March, 2013, 11:35

I'm not saying that ATMs are irreplaceable in a general context, just that cashback via small businesses is no substitute for ATMs. As for maximizing the bang for their ATM buck, banks have been doing that in India for over 10 years. I remember a time in the early 2000s when the ATM of my (German) bank in Frankfurt could dispense cash and do nothing else, not even display the updated account balance. Whereas, during the same era, the ATMs of one of the Top 3 private sector banks in India supported mobile topup and a few more advanced features (yes, they could also display updated account balance). 4-5 years ago, this bank started supporting P2P money transfer from its customers to non-account holders who could withdraw the money from its ATMs by keying in a PIN# - a feature that's just about making an entry in many countries during the last 1-2 years. Coincidentally, I just received an email from this bank today announcing instant FD opening, event ticketing and many more value-added features on its ATMs. I'm convinced that many banks in India are at the forefront of extracting maximum value from their ATM estate. Advising them to do so is preaching to the choir even if it does result in a lively discussion.

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Mukesh Gupta

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SAP India Pvt ltd

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