Unit – 32 : Payment Systems and Electronic Banking Automated Teller Machines (ATMs)

Automated Teller Machines (ATMs) are primarily used for performing some of the banking functions such as the withdrawal of cash or the deposit of cash/cheque, etc., by using an ATM card.

The committee headed by Dr. C. Rangarajan recommended the setting up of ATMs in India.

Convenience of ATMs To the Customers:

  • 24 x 7 access availability
    • Less time for transactions (less queue)
    • Privacy in transactions
    • Any branch/anywhere banking enabled
    • Acceptability of card across multiple bank ATMs, even foreign tourists can access Maestro/VISA / ATMs

To the Bank:

  • Cost of setting up ATMs is lower than setting up a branch
  • Migration of the routine transactions to the ATMs frees the bank staff for more productive work
  • ATMs serve as the crucial touch point for cross-selling of the bank’s products
  • Enables the bank to display products on the screen and serves as a media for publicity for the bank
  • Less hassle in handling cash.

The following components of the ATM provide the customer interface:

  • Video Display Monitor
  • Keyboard/Keypad
  • Touch Screen
  • Slots: There are slots in the ATM for various purposes as detailed below:

(i) Card Reader (ii) Cash Dispenser

(iii) Envelope Dispenser (iv) Deposit Slot

HWAK (The Intelligent Auto-teller and Netware Management System)

Intelligent auto-teller systems are a special breed of auto-teller machines capable of thinking for themselves, that means they are fast, impose less demands on your banking systems and serve the customers more like a personal banker than less sophisticated auto teller systems.

HWAK provides unsurpassed service even without benefit of a reliable communication network.

Benefits of HWAK are:

  • Customer satisfaction.
  • High availability
  • Online and offline auto-recovery
  • Anytime full banking service
  • Low cost, shorter queues and less number of tellers with ease of use
  • Quick and early implementation
  • Enhanced security and audit control
  • Network management
  • Predictable cost of ownership
  • Comprehensive ‘One Stop’ autobanking.

White Label ATM (WLA)

Traditionally, Automated Teller Machines (ATMs) have respective bank’s logo. So just by looking, this is SBI’s ATM, this is ICICI’s ATM and so on.

But White label ATM doesn’t have such Bank logo, hence called White label ATMs.

RBI has given license / permission to non-bank entities to open such ATMs.

Any non-bank entity with a minimum net worth of Rs.100 crore, can apply for white label ATMs. (not just NBFC, any non-bank entity can apply.)

Late 80s: first ATM in India; 2012: RBI issues guideline for White label; 2013: RBI gives license/permission.

Tata Communications Payment Solutions Limited =the first company to get RBI’s permission to open

White label ATMs.

They started their chain under brandname “Indicash”.

Other White label= Muthoot Finance, Srei Infra., Vakrangee Software, Prizm Payments, AGS. More than 15 companies given such permission.

National Payments Corporation of India (NPCI)

National Payments Corporation of India (NPCI) was incorporated in December 2008 and the Certificate of Commencement of Business was issued in April 2009.

It has been incorporated as a Section 25 company under Companies Act and is aimed to operate for the benefit of all the member banks and their customers.

Presently, there are ten core promoter banks ( State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC).


The Indian market offers huge potential for cards penetration despite the challenges. RuPay Cards will address the needs of Indian consumers, merchants and banks. The benefits of RuPay debit card are the flexibility of the product platform, high levels of acceptance and the strength of the RuPay brand-all of which will contribute to an increased product experience.

Lower cost and affordability :

Since the transaction processing will happen domestically, it would lead to lower cost of clearing and settlement for each transaction. This will make the transaction cost affordable and will drive usage of cards in the industry.

Customized product offering :

RuPay, being a domestic scheme is committed towards development of customized product and service offerings for Indian consumers.

Protection of information related to Indian consumers :

Transaction and customer data related to RuPay card transactions will reside in India.

Provide electronic product options to untapped/unexplored consumer segment :

There are under-penetrated/untapped consumers segments in rural areas that do not have access to banking and financial services. Right pricing of RuPay products would make the RuPay cards more economically feasible for banks to offer to their customers. In addition, relevant product variants would ensure that banks can target the hitherto untapped consumer segments.

Inter-operability between payment channels and products :

RuPay card is uniquely positioned to offer complete inter-operability between various payments channels and products. NPCI currently offers varied solutions across platforms including ATMs, mobile technology, cheques etc and is extremely well placed in nurturing RuPay cards across these platforms.

Credit Card

  1. It allows the cardholder to pay for goods and services based on the holder’s promise to pay for them.
  2. The issuer of the card creates a revolving account and grants a line of credit to the cardholder, from which the user can borrow money for payment to a merchant or as a cash advance.
  3. The size of most credit cards is 3 3⁄8 × 2 1⁄8 in (85.60 × 53.98 mm).
  4. It allows the consumers a continuing balance of debt, subject to interest being charged.

Charge Card

  1. Transactions are accumulated over a period of time, generally a month and the total amount charged, i.e. debited to the account.
  2. The credit card holder is given about 25 to 50 days’ time to credit his account in case there are insufficient funds in his account at the time of debit.
  3. Since the transactions are accumulated, it is only charged, i.e. not debited to the account immediately, such cards are called charge cards.

Debit Card

  1. A debit card (also known as a bank card or check card) is a plastic payment card that provides the cardholder electronic access to their bank account(s).
  2. Payments using a debit card are immediately transferred from the cardholder’s designated bank account

Electronic Purse

Type of smart card which, with an embedded microchip, provides multiple options, such as debit card or credit card type payments.

Smart card

  1. A smart card is a payment card embedded with a computer chip, essentially functioning like a mini-computer on a card. The memory and the computing power of the chip on the card could transform payments in many ways. The chip, a true technological breakthrough, holds at least 80 times more data than the magnetic stripe on existing credit cards.
  2. Unlike the magnetic stripe, the chip can process data as well as store it, and because each program on the chip runs on independent software, several different programs can operate on the same card at the same time.
  3. An added bonus: the smart card is a more secure method of payment that protects the cardholder’s account information from fraudulent use.

Electronic Cheque

The smart card can be used during electronic fund transfer at the point-of-sales (EFTPOS). At a retailer’s checkout, the card is placed in the reader, where it automatically goes through authentication sequences.

Electronic Cash

Funds can be loaded into a card for use as cash. This electronic cash can then be used for making purchases

Electronic Token

The principle here is that a prepaid area is set aside to store electronic units of time or electronic tickets, etc., for a specific service or item. Magnetic strip cards are often used with public telephones, parking meters and vending machines.

Anytime Banking

ATMs have eliminated the time limitations of customer service, and offer a host of banking services, including deposits, withdrawals, requisitions, instructions and transfers. HSBC Ltd., for instance, has taken the concept of remote banking further by providing a service called Hexagon, which allows the customer to access his accounts from a PC that is installed at his office or at his home – that is desktop banking – for the customer.

Anywhere Banking

With the introduction of ATMs and tele-banking, financial details can be accessed from remote locations and basic transactions can be effected even outside the bank.

Corporate Banking

At present, by utilising remote banking facility, corporate customers will be able to get the following services:

  • Getting their current balance or getting their statement of accounts for any pre-defined period
  • Ordering cheque books
  • Ordering intra-bank and inter-bank fund transfers
  • Instructing stop payments of cheques
  • International remittances
  • Opening letter of credits.

Cheque Truncation

Process of stopping the flow of the physical cheque issued by a drawer to the drawee branch

The physical instrument will be truncated at some point en-route to the drawee branch and an electronic image of the cheque would be sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc.

Mobile Banking

  1. Undertaking banking transactions using mobile phones by bank customers that involve credit/debit to their accounts.
  2. Only banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer mobile banking services.

Only banks who have implemented core banking solutions would be permitted to provide mobile banking services.

  • The services shall be restricted only to customers of banks and/or holders of debit/credit cards issued as per the extant Reserve Bank of India guidelines.
  • Only Indian Rupee based domestic services shall be provided. Use of mobile banking services for cross border inward and outward transfers is strictly prohibited.

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