SBI set to Outsource 40% of On-Site ATM Maintenance

The State Bank of India (SBI) is set to make a significant move in managing its automated teller machines (ATMs) by outsourcing the maintenance of 10,000 of its on-site machines. This plan, which sources from the ATM vendor and cash logistics industry describe as the largest of its kind, is expected to lead to a request for proposal (RFP) being issued in about 45 days.

Currently, SBI operates around 25,000 on-site ATMs, and if the RFP goes ahead as planned, this would mean that 40% of these machines will be maintained by external agencies. Overall, the bank has a total of 63,580 ATMs, which includes both on-site and off-site machines.

Outsourcing the maintenance of ATMs can help banks like SBI reduce costs and focus on their primary services. The ATM sector has been facing challenges, particularly due to rising expenses associated with loading cash. There’s also ongoing pressure to increase the interchange fee — the amount banks earn when customers use an ATM from another bank — from the current ₹17 to between ₹20 and ₹23 after five free transactions.

Another advantage of outsourcing is that it can address issues related to ATM downtime. When maintenance is handled by vendors, they become responsible for ensuring the machines are operational. If an ATM runs out of cash, the bank can hold the vendor accountable, potentially avoiding penalties.

The ATM market in India has been experiencing some activity recently after a period of stagnation following the demonetization of ₹500 and ₹1,000 notes in 2016, when the number of ATMs fell to 225,000. From September 2023 to March 2024, the number of RFPs in the ATM sector surpassed 44,500, which is higher than the 40,000 ATMs added after demonetization. SBI has previously floated an RFP to acquire 16,000 new ATMs and cash recyclers, as well as for the outsourcing of 17,500 ATMs.

Other banks are also looking into outsourcing their ATM maintenance. Bank of Baroda has placed an order for 7,500 outsourced ATMs, while Punjab National Bank has opted for 3,500. Additionally, the deployment of white-label ATMs (WLATMs), which are set up and managed by companies other than banks, has also increased, with companies like India1 Payments and Hitachi Payments surpassing 10,000 ATMs in their networks.

This strategic shift by SBI could reshape the landscape of ATM management in India, paving the way for enhanced efficiency and better customer service across the banking sector.