BANKING TECHNOLOGY | Contributed Content, India
Diptiman Chakraborty and Romadeep Chakraborty

The evolution of ATM technology in India


A lot has been said about ATM Technology in Asian Banking and Finance. The idea of self-service in retail banking developed through independent and simultaneous efforts in Japan, Sweden, the United Kingdom and the United States.

The first ATM was put into use in 1959 in the Kingsdale Shopping Center in Upper Arlington, Ohio as an automated deposit device. In simultaneous and independent efforts, engineers in Japan, Sweden, and Britain developed their own cash machines during the early 1960s.

The first ATMs were designed to dispense a fixed amount of cash when a user inserted a specially coded card. The first modern ATMs came into use in December 1972 in the UK.

ATMs were introduced to the Indian banking industry in the early 1990s initiated by foreign banks. Most foreign banks and some private sector players suffered from a serious handicap at that time- lack of a strong branch network.

ATM technology was used as a means to partially overcome this handicap by reaching out to the customers at a lower initial and transaction costs and offering hassle free services.

Since then, innovations in ATM technology have come a long way and customer receptiveness has also increased manifold. Public sector banks have also now entered the race for expansion of ATM networks. Development of ATM networks is not only leveraged for lowering the transaction costs, but also as an effective marketing channel resource.

Banks across India have started the process of setting up ATMs enabled with biometric technology to tap the potential of rural markets. A large proportion of the population in such centers does not adopt technology as fast as the urban centers due to the large scale illiteracy.

Development of biometric technology has made the use of self service channels like ATMs viable with respect to the illiterate population. Though expensive to install, the scope of biometrics is expanding rapidly.

It provides for better security system, by linking credentials verification to recognition of the face, fingerprints, eyes or voice.

Some large banks of the country have taken their first steps towards large scale introduction of biometric ATMs, especially for rural banking. At the industry level, however, this technology is yet to be adopted; the high costs involved largely accounting for the delay in adoption.

Installation of multilingual ATMs has also entered pilot implementation stage for many large banks in the country. This technological innovation is also aimed at the rural banking business believed to have large untapped potential.

The language diversity of India has proved to be a major impediment to the active adoption of new technology, restrained by the lack of knowledge of English.

A Talking ATM is a type of ATM that provides audible instructions so that persons who cannot read an ATM screen can independently use the machine. All audible information is delivered privately through a standard headphone jack on the face of the machine.

Alternatively, some banks such as the Nordea and Swedbank use a built-in external speaker which may be invoked by pressing the talk button on the keypad.[97] Information is delivered to the customer either through pre-recorded sound files or via text-to-speech speech synthesis.

A postal interactive kiosk may also share many of the same components as an ATM (including a vault), but only dispenses items relating to postage.
Multifunctional ATMs are yet to be introduced by most banks in India, but have already been recognized as a very effective means to access other banking services.

Multifunctional ATMs are equipped to perform other functions, besides dispensing cash and providing account information.

Mobile recharges, ticketing, bill payment, and advertising are relatively new areas that are being explored via multifunctional ATMs, which have the potential to become revenue generators for the banks by effecting sales, besides acting as delivery channels. Most of the service additions to the ATM route require specific approval from the regulator.

ATM switches are used to connect the ATMs to the accounting platforms of the respective banks. In order to connect the ATM networks of different banks, apex level switches are required that connect the various switches of individual banks.

Through this technology, ATM cards of one bank can be used at the ATMs of other banks, facilitating better customer convenience. Under the current mechanism, banks owning the ATM charge a fee for allowing the customers of some other bank to access its ATM.

Among the various ATM network switches are CashTree, BANCS, Cashnet Mitr and National Financial Switch.

Most ATM switches are also linked to Visa or MasterCard gateways. In order to reduce the cost of operation for banks, IDRBT, which administers the National Financial Switch, has waived the switching fee with effect from December 3, 2007.

The future of ATM technology will see the use of machines without the cards. More banks are set to adopt a technology that allows their customers and third parties to withdraw cash from ATMs without a card.

This new generation of ATMs works alongside a mobile-banking application that can be downloaded onto a mobile phone. In order to ensure that security is not compromised, a six-digit code will have to be correctly entered into the ATM machine before cash is released.

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.

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Diptiman Chakraborty and Romadeep Chakraborty

Diptiman Chakraborty and Romadeep Chakraborty

Diptiman Chakraborty is Manager at the National Payments Corporation of India.

Romadeep Chakraborty is Assistant Manager in National Securities Depositories of India. 

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