7(j) No. of Household broadband connections in India

Your client is a public sector bank. It has been facing declining profits from its ATM business. Help them in finding solutions to their problem I would like to begin with confirming the problem statement and would also like to ask few clarifying questions. Also, I would like you to please help me with a brief understanding on how ATM business works for the banks there a particular mode of transportation that they want to focus on? Yes sure, go ahead. So our objective is to just focus on profits or profitability of ATM business Yes, you may focus on absolute profits So as per my understanding, the revenue for ATM business comprises of the fee that is charged for transactions of own bank customers (over and above the free transactions) plus the fee charged by other banks for other bank customers using our ATM Yes, that’s correct but you are missing on one-line item that is crucial for profitability Is it related to fixed costs or variable costs? No, so in ATM business, your revenue loss becomes your cost and has a double impact on your income statement, which means if your customer uses other bank ATM, you loose out on revenue and you also have to pay a cost to the other bank for that transaction Correct thanks for helping me there. So, this burden is high mostly in cases of free transactions Right So, few more questions I have – How many ATMs do we have, any major split in terms of branch/non-branch, geography etc. How do we stand in terms of the number of ATMs with respect to other banks?

Okay. So our client has around 3500 ATMs spread across the country at present. Last year they closed 500 ATMs on account of losses. As far as industry is concerned, we have the second largest number of ATMs in India. Highest number of ATMs operated by a single bank is 5000 Thanks. And any information on how is our profitability is as compared to the peers Our profits have dropped by 25% in the last 3 years. Other public sector banks have either maintained profitability numbers or have seen a drop of maximum 5-7% in the last years. Private sector banks are having highly profitable ATM business Are the inter-bank commissions standard – meaning is this same for all the banks? Yes, it is regulated by RBI Okay, what I can think of here is that we are losing out on revenue which in turn is impacting us with additional costs as explained by you earlier. The reason I feel this can happen is majorly because of 2 reasons – 1. More technical downtime and unavailability of cash in our ATMs, 2. ATMs not located in appropriate places or competition have ATMs strategically located which reduces ATM transactions for us – both own customers as well as other bank customers

You may focus on the second hypothesis of yours. Okay, so for approaching this side of the problem, we need to first understand the 3500 ATMs we have and which are the ones that are loss making in terms of no of transactions. We need to have case by case analysis of each ATM or clusters and decide based on profitability, location etc. and a decide to shut down loss making ATMs. Further we need to find out locations which bring high number of ATM transactions like metro stations, IT parks, Residential societies etc. and we need to capture those places where competition is less or is not present. A future driven approach has been applied. Further we can explore option of mobile ATMs and can provide portable ATM machines to shops in residential localities where people can withdraw money using that machine and can collect cash from the shopkeeper. IDFC has been using this model lately That’s good enough. This was a constructive interactive. Thank you and all the very best