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Are cash recyclers better than ATMs?

LiveMint logoLiveMint 21-08-2017 Vivina Vishwanathan

New-age banks are considering using cash recyclers instead of ATMs. We spoke to experts about the differences between recycler and ATMs and whether recyclers are useful for consumers.

Radha Rama Dorai, MD–ATM and allied services, FIS

Unlike an ATM, a cash recycling machine can accept cash and give immediate credit in the customer’s account. It can accept notes in bunches of around 250 at a time and can read notes of different denominations while rejecting fake or mutilated ones. Recyclers also need fewer replenishments or evacuations, as they can dispense the very notes that they accept. This reduces the cost of operations for banks. These machines are, however, more expensive than ATMs, though the difference is coming down significantly. ATMs would cost slightly less than half the price of a cash recycler. Since these machines dispense and accept cash, they require more maintenance. Banks could decide their recycler strategy depending on their customer profile, branch locations and deposit-withdrawal ratios. If a bank branch has a lot of cash deposits from small establishments, it could have a cash recycler installed with 24x7 access so that these establishments can deposit the cash at the end of the day and withdraw the required amounts from the same machine the next day. This will reduce the load on the branch staff. Some branches may have clientele that is predominantly salaried, and who may not have too many cash deposits. Such customers would prefer a cash dispenser from which they can quickly withdraw and not wait in queue behind other customers who want to deposit the cash.

Puneet Kapoor, senior executive VP, Kotak Mahindra Bank

I would say it is an evolution. ATM is now a 30-year-old technology, which handles the dispensing. Five years ago, cash deposit machines (CDMs) or bunch note acceptors (BNAs) came in. Recyclers accept cash with real-time credit to the account holder. CDMs come with preconfigured capability to work as recyclers. It can receive and dispense cash. That journey started about 2 years ago. The machine typically has four casettes. One casette is identified as a reject bin. Banks typically configure machines for three denomination: Rs100, Rs500 and Rs2,000. If a customer deposits Rs20 or Rs50 notes, that go to the reject bin because the machine can dispense only in three denomination. When customers deposit money, the machine identifies the denomination and also stacks it up for dispensing. For this technology to be successful, you need to have superior analytics support because that is when you will arrive at cash optimization. If there is very little dispensing, then the casette may go full. If there is only withdrawal and no deposit, then the machine will go cash out. The best case for this technology is where you don’t need the cash-in-transit vendor support any more. But that will never happen. At a machine-to-machine level, you have to understand the usage pattern and then arrive at the most optimal levels that you will work with. People are still trying to understand how to optimize it.

Rajeev Yadav, MD and CEO, Fincare Small Finance Bank Ltd

The trend recently, among small finance banks and some of the leading private and public sector banks, has been to install recyclers, and we expect this trend to continue. The Reserve Bank of India also reimburses up to Rs2 lakh for recyclers installed in metro or urban areas, and up to Rs2.5 lakh in semi-urban or rural areas, to boost their adoption. Cash deposits from it into a savings or current account, or towards loan repayment is instantly credited to the customer’s account, providing a sense of greater security. Recyclers are helpful where banks are looking at rationalizing their branch networks, with recyclers playing the role of bank tellers. Even where branches play a key role, recyclers help reduce transaction time for customers who are comfortable with self-service. Recyclers are also available for cash deposit beyond banking hours, which is useful for small businesses.

Cash recyclers validate the cash deposited, separate the damage/soiled/counterfeit notes by transferring them to a different bin, and use the validated cash for dispensing. This improves efficiency and lowers the cost of cash management, though not completely replacing the need for cash management as there are still mismatches between how much cash is deposited versus how much is dispensed. Cash recyclers cost about Rs7 lakh per machine, and are subsidized as stated above. ATMs cost about Rs2.5-3 lakh per machine.

Ravi B Goyal, chairman and MD, AGS Transact Technologies

Post demonetisation, cash recyclers began to gain popularity owing to the critical role they played in remonetisation. Globally, they have been fairly successful due to their ability to enhance efficiency and minimize costs with fewer cash replenishments and enabling better utilization of branch teller time. Banks across India are already warming up to it and we foresee significant increase in their deployment this fiscal. Recyclers ensure transparency of cash inventories at all times and also help reduce the need for frequent cash replenishment. Initially, there was a resistance towards cash recyclers, owing to higher investments, security concerns as well as lack of clarity about the sum total available in the devices in terms of cash deployed and cash withdrawn. However, technological advancements including high-end fake-note-detection technology, better security measures and other infrastructure facilities have made recyclers a viable option in the cash-strapped areas.

In a country like India, where cash and digital payments will continue to coexist, we believe that apart from recyclers, cash-in-transit companies powering ATMs will create a holistic transaction ecosystem. While cost of cash recyclers is higher than that of regular ATMs, they need to be seen as long-term investments that will benefit both the banks and service providers, especially in the ‘less-cash’ areas.

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