ATM Maker Diebold Sees Demonetization As Big Business Opportunity
Financial Inclusion has been an important objective for the Reserve Bank of India (RBI) for a very long time, which has also advocated a combination of ‘Brick and Mortar’ structure with ‘Mouse and Click’ technology for extending financial inclusion in geographically dispersed areas. From a regulatory side, Banks were mandated to open at least 25 per cent of their new branches in unbanked rural centers. Following this model, Diebold has been doing business in India for more than 25 years now, and has presence in over 4,000 cities and towns with over 225 service centres and ATM engineers spread across the country. The company, which has just completed integration following the buyout of Nixdorf, claimed that it is the first to complete recalibration of cash-vending machines and dispense the new banknotes after the demonetization announcement in November last year.
In an exclusive conversation with CXO Today, Jaivinder Singh Gill, Managing Director - South Asia & Vice President Operations - Asia Pacific, Diebold Nixdorf, discusses the future of banking and e-PoS market and how the company plans to thrive in a cashless economy.
CXO Today: The current scenario of banking is moving without physical banks. Do you think the concept of ‘banking without banks’ will perish in India?
Gill: The number of banking outlets in villages went up from 67,694 in March 2010 to 586,307 in March 2016 after RBI permitted appointment of BCs and laid out a roadmap for spreading banking services in rural India through a mix of bank branches and BC outlets. In addition, the number of urban locations covered through BCs has also surged from 447 in March 2010 to 102,552 in March 2016.
While there is considerable improvement in access of banking services through a mix of physical and virtual mode, it is widely believed that there should be a fair balance between the number of BCs and brick and mortar branches for better alignment of the inclusion efforts. Accordingly, it is mandated to open physical bank branches in all villages above a population of 5,000 in a phased manner. According to RBI, this would also enable banks to not only provide quality financial services but also timely support to their BC network.
CXOToday: Can you please provide some insights on the changing consumer patterns in Indian banking.
Gill: Firstly, the ATM transactions are up. The ATM transactions have jumped up by 26% since Nov’16 and the value of ATM transactions is up by 83% since Nov’16. Source: RBI data. Second, customer transaction behaviour is also now a mix of both ATM and POS transactions – If you consider pre-demonetisation phase (Oct 2016), the % of POS transactions out of total transactions (ATM+POS) was 22%. The same proportion is now at 35% (Mar 2017), as per RBI data. Finally, we see the increasing usage of Mobile as a banking channel and use of social media by millennials to interact with Banks.
CXO Today: With India moving towards a digital economy both on the consumer and customer front, what is your view on the fate of physical retail stores and PoS machine market?
Gill: The POS market is expanding fast in India with digital adoption on the upswing. Some data facts highlight that there has been a 67% growth in absolute number of terminals across the country. There has been a 64% growth in the number of POS transactions in India.
PoS market is directly linked to the growth in the retail industry. The organised retail today contributes to just 8-10% of overall retail market in India whereas in developed economies like the USA, this is at almost 65%. This indicates a very high growth potential in this space. Further, the high growth will be observed in Tier 2 and 3 cities/ towns due to rapid urbanisation, growing aspiration levels and availability of credit.
The stores of future have to factor in the importance of the change in today’s customer behaviour. It has to be shaped into a unique experience by the stores so as to see increased footfalls. Augmented reality (AR) and Virtual reality (VR) are another two key levers which needs focus by the retailers to drive footfalls.
Adopting Omni channel approach is another major criteria on which the retailers need to shape their strategy on. Traditionally the retailers have been running parallel sales channel systems (web, mobile, etc.) to their traditional brick and mortar stores. This creates a complex challenge since today’s customer wants to enquire, try & buy “on-demand”. Hence the Omni-channel approach is the need of the hour enabling to connect all the sales channels that a retailer has (store, web, mobile, etc.) to generate more sales.
CXO Today: What is your [organization] experience with Demonetization? Can you share any interesting stories post demonetization.
Gill: The whole company came together to push for calibrating all the ATMs in the country in record time. Besides completion of calibration, Diebold Nixdorf had the first ATM to go live with both of the new currencies in the country. We had setup dedicated regional (North, South, East, and West) and central (Mumbai) war-rooms to coordinate the entire project along with cash replenishment agencies.
Executing this on the field though, was only possible due the dedicated staff at Diebold Nixdorf especially the ATM engineers on the ground, all of them were working non-stop 7 days a week with the sole aim of calibrating the machines to enable them to start dispensing the new cash. The engineers on the field used to start their day very early in the morning and be on the field till late in the night (sometimes till early morning next day!) rushing from one ATM to another and calibrating them.
CXO Today: We have heard from IT hardware channel partners, their margins are going down, and they are losing sales against the e-commerce players. What advise you would like to give them in terms of alternative hardware products like PoS machine or ATM machines and more?
Gill: India is one of the world’s top growth economy with the GDP growth forecasted to reaccelerate to 7.4% in fiscal 2017 and 7.6% in 2018, due to reform of taxes on goods and services, higher consumption, etc. improving confidence and thus business investments and growth prospects. (Source: Asian Development Bank/ India: Economy).
In the e-POS space, Diebold Nixdorf India is the market leader with its ePOS units installed for major retailers in India. This market space needs innovation and right product mix to cater to the growing needs of the high growth India retail market and be ahead of the curve. The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. It accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and around 8 per cent of the employment. India is the world’s fifth-largest global destination in the retail space and the Indian retail market is expected to nearly double to US$ 1 trillion by 2020, driven by income growth, urbanisation and attitudinal shifts. (Source: India Brand Equity Foundation research, as per a report titled ‘Retail 2020: Retrospect, Reinvent, Rewrite’ by The Boston Consulting Group and Retailers Association of India)
The e-POS solution has to deliver the following to achieve the desired outcomes. From the perspective of business benefits, it delivers a seamless, Omni-channel retail experience to enhance competitiveness, can rapidly roll out pre-configured templates to support diversification into different retail sectors and accelerate international expansion with centralized store-lifecycle management. The technical benefits are also immense. It enables a reliable, secure and easily manageable platform for retail asset management based on trusted industry standards. It also comes with comprehensive data exchange options and offers support for centralized and client/server configuration.
CXO Today: What is the roadmap for the India market in the next one year?
Gill: We have been doing business in India for more than 25 years now, and has presence in over 4,000 cities and towns with over 225 service centres and ATM engineers spread across the country. We completed integration following the buyout of Nixdorf, and believe India is a huge frowth market for us. We expect high growth in cash recycling with almost 30% y-o-y market growth expected in 2017/18 as per our internal estimates, Branch redesign and teller automation is also a focus area for Banks to reduce their operational costs. Growth is also expected in cash system logical security solutions, multi-vendor software solutions, services, and e-POS growth in Tier 2/ 3 market segments. The ATM replacement market with Banks opting for technology refresh also has immense potential. This growth market is forecasted to reach up to 52% of the overall procurement by 2021 (Source: Retail Banking Research 2016)
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