India’s Demonetization and White Label ATMs Impact CIT Market

India’s Demonetization and White Label ATMs Impact CIT Market

Currency Changes Throw Market into Scramble

India’s recent demonetization of the former 500 and 1,000 rupee notes has resulted in dramatic increase in cash-in-transit (CIT) services there over the past two months.  The old 500s are currently being replaced by new notes, while the 1,000s will be replaced with new 2,000 rupee notes.  The government hopes to minimize the amount of black market money and corruption in the country while also increasing cashless transactions. 

The process has resulted in shortages at many of India’s 220,000 ATMs with as many as 14,000 ATMs all but shut down in the whirlwind of activity.  In addition, because of the changes in size and thickness of the new notes, each ATM has had to be refilled and manually reconfigured in order to properly dispense cash.  As a result, demand for traditional armored transport services for many of these machines has been limited in recent weeks. 

However, those ATMs that are still operating will need to be refilled more often -- in many cases, two or three times a day -- until the new 500s and 2,000s are fully stocked.  The machines are using smaller denomination notes and therefore hold less cash value at a time.  While the government has taken steps to minimize rapid depletion of ATMs, such as instituting a temporary maximum daily withdrawal rate, demand for armored services will increase. 

Growing base of WLAs will Boost Armored Transport Demand

Although the current monetary situation will affect armored transport demand in the short term, long term trends will be more affected by the number of ATMs in India.  ATMs have been hit hard by the cash crisis, with operators losing tens of millions of rupees in revenues and some asking the government for compensation.  Nonetheless, the number of ATMs is expected to continue to grow rapidly over the next five years, fueled by the ongoing expansion of white label ATMs (WLAs). 

In 2012, the Reserve Bank of India (RBI) issued its official guidelines for WLAs, which are ATMs operated by non-bank entities.  The purpose of these contracts is to extend availability of ATMs to smaller urban and rural areas across India.  Although the money for these machines is issued via partnerships with banks, the machines themselves are run by companies that operate them at a lower cost than a bank could. 

There are a number of major White Label ATM Operators (WLAOs) in India.  Tata (branded as Indicash), BTI Payment (India1 ATM), and Prizm (Moneyspot) are among the largest WLAOs active in the market.  Per their agreements with the RBI, each WLAO must install a minimum of 9,000 WLAs within their first three years of operation.  Of those machines, at least three must be installed in smaller urban or rural areas for every one installed in a major urban setting. 

This expanding base of ATMs will drive demand for armored transport services in India, which is expected to increase at an 11 percent annual pace through 2020. 

Learn More about the Security Services Market in India and Other Countries

For more information, see the Global Security Services Market study by The Freedonia Group.  At 355 pages with 100+ tables and charts, this comprehensive report provides vital information on market environment factors such as pricing patterns, legal & regulatory issues, and technology and product development.  In addition, the study includes analysis on the following:

  • Revenue data
  • Demand by Type, Market, and Region
  • Industry composition
  • Market share
  • Mergers & acquisitions
  • And much more

About the Author:

Katherine Brink is an industry analyst at The Freedonia Group, where she writes industry studies focused on the security and consumer goods markets.

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