With the move towards digital transactions and payments, it will be interesting to see whether ATMs will exist in the future. Recently, RBI has asked banks not to focus on increasing the number of ATMs, and instead focus on increasing digital channels and transactions. The current trends indicate that the urban educated people are using ATMs for the sole purpose of withdrawing money, and other banking services which are currently available at ATMs are being done through internet or mobile banking for the simple reason that it is convenient.
Adding to this, demonetization and subsequent lack of cash has made withdrawing cash from ATMs a frustrating and unpleasant task. Also, to benefit the consumers, merchants have started accepting alternatives to cash such as E- Wallets, UPI, Aadhar Based Payments, etc. There has been an increase in the number of POS machines across the country, which is continuing to grow. The number of POS machines as per December 2016 were 15 lakhs as reported by SBI. Since then, more than 10Lakh new swipe machines have been added, taking the total to 25 Lakhs. Looking at all the advancements in technology and the upcoming new ways of making payments, its indeed questionable if ATMs will continue to exist in the future.
While acceptance in the urban areas has increased, the rural areas are not still comfortable with the alternate channels. Their issue was simple; digital money cannot buy them their daily needs. The daily needs are items of small amount payments for which digital forms of money is not widely accepted in the rural areas. Farmers may accept cheques for their crops, but the cheque clearance takes 3-4 days. They need the cash immediately for their daily needs and that is preferred route as settlement is immediate.
Even after various programs by the government relating to issuance of debit card under Jandhan Yojana, these farmers have nowhere to use their debit cards. As per reports, on an average, only 25-35% of these debit cards have been activated by the people. Opening of account and issuance of debit card is the first step. The second step is to provide for terminals where these cards can be used. The nearest ATMs/Branch to the villages are in major towns. They must travel a long way to reach these towns to get cash. Also, looking at the trends, people in rural areas withdraw amounts based on their daily expenses and emergency needs. Not having ATMs has been a frustrating and painful experience for the people. Currently only 20% ATMs are in rural areas and the rest 80% are in metros, urban and semi-urban areas.
ATMs can provide the rural people a vast variety of banking services which the branch can provide. Not having to invest in opening branches to reach out to the rural people will have a positive effect on the financial inclusion level in the country. The ATMs can be the banker in such areas. According to the same report by SBI there is still a need of 20 lakh POS machines in the country for people to have digital channels of payments as a substitute to cash. In developed countries where the digital channel for banking is extensively used, ATMs and digital channels of banking coexist. The number of ATMs per lakh people in the United States is 10 times higher than the same ratio in India. There is a long way to go and the focus of the government should be going digital keeping in mind the needs and requirements of the vast rural and financially illiterate population of the country.
Looking at all the data and considering the fact that India is still a predominant cash economy, there is a strong case to believe that ATMs will exist in the future and would act as a supplement to the digital channels, providing many more services to the consumer other than just cash withdrawal. The primary purpose for which an ATM is currently used i.e. cash withdrawal may evolve to include provision of various other banking services which the branch provides. This is much more lucrative as the cost of setting up branches in all villages is not justified and a set of ATMs together with one staff member could run as an automated branch. With the need of improving the ratio of ATMs especially in rural areas, there is also a need for educating people regarding usage of ATMs’ full-fledged services. With this, the country will be able to reach a level where all its citizens are using and benefiting from the financial services available to them.
-Shaarang Singh ( IIM Indore)