Why banks do not issue ‘ATM only’ standalone cards or ‘ATM only’ cards linked to card service provider/s
The very basic legal interpretation of the word ‘banking’ as defined in the Banking Regulation Act, 1949: “Accepting deposits of money, for lending or investment, from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise. All payment mechanisms result in a debit to the deposit account other than cheques and have a direct relation to the word ‘Otherwise’ used in the above definition. An Automated Teller Machine (ATM) card or a debit card is issued to an account with a bank
Automated Teller Machines (ATMs) are commonly used by people to withdraw money from ATMs. Such machines are installed by the side of the branch of the ATM issuer bank or off-site. Modern machines allow a variety of other functions for account holders to perform at the machine using the card issued for the purpose.
Due to restrictions by banks on the number of free withdrawals by customers at counters of the bank’s branch (home branch or otherwise), people use the ATMs during or outside the bank’s hours of business.
Due to certain operational norms fixed by RBI for the convenience of the banking customers’ usage of ATMs of other banks by customers/ATM debit card holders of other banks has become cost-effective, and has become technologically possible/feasible due to ATM network switch. as normally referred to or networks based on IP technology.
ATMs allow clients many other ATM/Debit card-based financial functions and thus importance usefulness has increased manifold.
Standalone ATM Cards and interoperable ATM Cards
In simple words, ATM cards are payment cards issued by banks linked to a bank account. You can use them for withdrawing money from ATMs and doing many functions at the ATM. Such cards cannot be used for other online/offline transactions.
While ATM cards and Debit Cards are now considered to be the same, things are different in many ways.
ATM cards issued can be standalone or linked to Visa Card/ Master Card (and now Ru-Pay card) card service providers. Debit cards are used to perform a broader spectrum of functions (online/offline transactions) in addition to drawing cash.
Since the early years of this century, banks reduced the new issue of standalone ATM cards and started issuing debit cards first standalone limiting to issuer bank network merchants & ATMs, later linked to specific card service providers (like VISA/Master Card etc) with various added benefits like accident insurance, gits, discounts.
Slowly customers also got accustomed to using debit cards though the majority of them have not been using them at e-commerce/ merchant (ME) sites (PoS) or for net banking-related functions. The use of cards on other banks’ ATM networks increased due to the free withdrawal allowed by RBI.
The concept of co-branded debit cards evolved and developed. Debit cards can be used for withdrawing money as well as for online and offline transactions. However, the customer has to go through the hassle of limit management etc or to restrict the services not required (which he/she wishes not to use) but are built-in (of course for a cost).
Banks gradually reduced issuing new ATM cards and started replacing the renewals of ATM cards with debit cards of course with higher fees/issue charges and annual fees. Gradually standalone debit cards (like SBI debit cards) were replaced by debit cards linked to international card service providers. Later chip-based debit cards (EMV) came and became popular. Later Near Field Communication (NFC) based debit cards and so on. Around the same time, National Payments Corporation of India (NPCI) sponsored Ru-Pay cards entered the arena and became popular due to its low fee structure and its linkage to the’ Jana Dhan Scheme’ of the Govt of India.
No one thought more about the needs of a common customer, the requirement of the new features the risks associated with additional features/offerings and the cost implications etc.
Cardless cash withdrawals, withdrawals through virtual cards, and UPI-based cash withdrawals from specially enabled ATMs are said to be the future of new-age banking.
Though the future of cash payments is said to revolve around withdrawals through virtual cards and UPI-based cash withdrawals one must remember there is a big class of bank customers [non-Jana-Dhana or other Basic Savings Bank Deposit Account (BSBDA) customers] who are educated but not technologically comfortable with the high-tech banking and do not intend using the debit cards at PoS or for e-commerce purposes etc.
This class wants to use cards at ATMs to draw cash and, at times deposit cash at the Cash Recycler Machine (Cash Deposit and withdrawal machine). For such customers, an ATM card is adequate and may be given.
As mentioned above when deciding between a Debit and Credit Card or an ATM card, the issuer may remember that it depends on the needs of the client. An ATM card is ideal if the client wants to access the ATM only for the money from the account and nothing more.
If such cards are set with fixed standard limits (like for classic/gold/platinum ATM cards etc) such holders may not need to set limits or go through the hassles of SMS/internet ATM-based activation/deactivation of ATM cards.
Blocking Unblocking an ATM card would be easily done through a branch of a Bank via SMS (Short Message Service) or on call to customer care from a registered mobile (subject to verification).
Many clients like very senior citizens and non-tech savvy do not want debit cards and wish to have only use ATM cards to use on the card issuer bank’s network only (like SBI’s debit card a few years ago). Standalone ATM cards can be issued to them.
Whereas when a customer intends to use an ATM card issued at the issuer’s ATM network and also another ATM network he/she can be issued an ATM card linked to a choice of card service provider like Ru-pay/VISA/Master Card.
The ATM card fees will be based on standalone or network-lined ATM cards.
As this card will no longer be multi-purpose there will be no chance of its use at PoS or e-commerce sites or net-based functions to commit financial crimes and would thus help in minimizing such instances.
It would not be out of place to mention that many customers call it an ATM card not knowing many dangerous features ‘built-in’ that are accidentally put on/put open by the tech-savvy person who assisted the debit cardholder in the process of debit card activation. If the customer checks with the issuer that is why it is written as a debit card prompt reply comes that the ATM card and the debit card are the same.
I do not know why RBI is not directing banks to issue standalone ATM cards to clients needing such cards to use only on the ATM card issuer’s ATM network (with one-time issuance charges to cover the cost of plastic cards with inbuilt security features). For a non-checkbook client, such a card is a must.
Summing up:
Banks will not easily give up this debit card stream of revenue generation unless the RBI comes with an iron hand.
Such ATM cards will be useful mainly to the senior citizen class, risk-averse and/or less technology savvy class of the bank customers.
Banks have been pushing the VISA/Master debit cards for a handsome revenue while many customers do not need them.
All banks have collectively discontinued the issuance of standalone/pure ATM cards. Many customers don’t want to use it for purchases on the internet, e-commerce websites (PoS) etc.
For them, VISA/Master Card linked debit cards become burdensome (including financial). more open cyber frauds.
Last but not least, a considerable portion of overall charges/fees from these debit cards are linked to card service providers shared by the issuer bank with international card service provider/s like VISA/Master card.
The object of this write-up is to generate a healthy debate on the underlined subject.
I hope RBI will consider these aspects and take appropriate action as deemed fit.
Shivaprasad Laxman Chhatre, Pune
Author Bio
Eye opener article and expect RBI will take the call