Axis in talks to change ATM vendor amid service issues

Axis Bank is in talks to acquire 3,500-4,000 of its automated teller machines (ATMs) currently owned and managed by troubled service provider AGS Transact Technologies and transfer them to a different service provider, people familiar with the matter told ET.

“Axis Bank has initiated discussions to move its ATMs away from AGS Transact due to the deteriorating service quality,” one of the sources said.

While the ATM valuation is outlined in the existing contracts and “takes into account depreciation, maintenance, and upgrade costs”, Axis Bank will conduct a comprehensive audit of the ATMs before finalising the purchase amount, the person said.

India’s third-largest private sector lender confirmed the development. “We are in discussion with AGS and evaluating options to take over the machines,” a spokesperson for the bank said.

AGS Transact did not respond to ET inquiry as of press time Tuesday.

According to sources, the agreement between Axis Bank and AGS Transact is a ‘Brown Label ATM‘ arrangement, where the service provider manages the entire ATM lifecycle, including hardware, leasing, maintenance, cash management, and network connectivity, while the bank’s branding appears on the machines. This model allows banks to expand their ATM networks efficiently without making direct infrastructure investments.While Axis Bank has engaged in talks with other ATM service providers to take over these machines, it will need to wait for the buyout to be completed before proceeding with the transition.Axis Bank operates over 15,000 ATMs and cash recyclers across the country, and despite challenges with AGS Transact, 80-85% of the bank’s ATMs continue to function smoothly.

In a report on March 10, ET highlighted that AGS Transact’s financial troubles have impacted over 38,000 ATMs of banks including State Bank of India, ICICI Bank, India Post Payments Bank, Yes Bank, HDFC Bank, and Kotak Mahindra Bank.

AGS Transact, which once managed a network of 75,361 ATMs and cash recycler machines, has been forced to migrate more than 50% of its machines to other network providers due to its ongoing financial difficulties.

The company is grappling with defaults on dues amounting to ₹726 crore, which have raised concerns about its potential insolvency. Credit rating agencies such as Crisil and India Ratings have downgraded AGS Transact’s ratings, citing a high risk of debt default.