November 26, 2013
I can’t count the number of times that I have been in a situation, where I wanted to buy a certain product impulsively but was short of cash. The next thing that I do is search for an ATM. Sometimes I am lucky to find the ATM nearby otherwise its an additional effort or no buy. State Bank of India may have made the whole process less cumbersome with the launch of a new channel by which withdrawing cash will be easy for customers.
SBI with a first of its kind initiative in India is allowing customers to withdraw cash of up to Rs 1,000 from any nearby shop/trader with a Point of sale terminal. Customer will be charged a fee of Rs 7.50, a proportion of which goes to the trader which will create a win-win situation for both the retailers and the bank. This is a quite a contrast to US where the customer is charged nothing for withdrawing petty cash. Its a different issue that some of the pharmacies and shops might not be happy about it in the US.
From the customers perspective: It is a value addition on SBIs debit card, as nowadays increasing number of business establishments, have POS machines.
From a Retailers perspective: It acts as an additional source of income, as it brings additional revenue of Rs 5 per transaction. The other benefits to the retailer are that now they can dispense cash back to the system, instead of going to the bank.
From a Bank Perspective: It will help them in reducing pressure on ATM as people looking to withdraw small amount of money will prefer a grocery store instead of going to ATM.
Reserve Bank of India had brought the idea of cash withdrawal from POS Terminal a couple of years ago. Increasing acceptance of debit card, credit card and other plastic media among people has helped the POS cause. Banks such as ICICI Bank, HDFC Bank and Axis Bank are leaders in providing POS terminals among private sector banks.
This idea will help the customers in fulfilling the sudden need of cash, what it also does is that customers can shop and also withdraw cash which can be pretty handy.
LTP View: SBI with this new channel of cash withdrawal could help increase the adoption of POS machines among retailers. Its a good source of revenue (Rs 5 per thousand). They also have to spend less on cash management and security because they will be able to dispose of a lot of cash in customer withdrawals. The benefits associated with the POS machines will also attract new retailers and smaller merchants who were afraid of using the machine before due to the exorbitant associated fees.