Demonetisation: Growth of digital money in India could lead to a decline in ATMs

The past couple of months have been very crucial for the Indian economy. The demonetisation of old Rs 1000 and Rs 500 notes was a bold decision by the government and in a country which is still developing, it was an important step. About 98 percent of the country has been dependant and driving on physical currency, and with withdrawal limits, it wasn’t surprising to see banks and ATMs bombarded with people trying to take out money. Now we’re not sure how much of the ‘black money’ was curbed out, but we do know that a good chunk of the population got familiar or had a certain idea about the various ways to pay and do transact digitally. Shopkeepers, cabs, even the local pan shops started using digital wallets or accepted debit/credit cards, and we think it’s brilliant. Sure, the new currency has started to roll out, but this is way more convenient. We don’t have to visit the ATM every now and then. Speaking of which, a recent report suggests that the growth of ATMs is going to slow down. According to Pralay Mondal, senior group president at YES Bank, “I don’t see a business case for significant expansion of ATMs in the near future. The way the acceptance of other digital modes will grow, there is no way I see ATMs growing that way." That seems like a valid point. ATMs started opening up in metros and towns in the early 90s when the country saw an increase in consumerism. However, according to the central bank data, only 9 percent new ATMs in the financial year ending March 2016, were added across India. This is a huge drop when compared with 25.4 percent in 2008-09 and 37.8 percent in 2009-10. Digital transactions in the past one month have registered a 40 percent month-on-month growth, payments through cards have jumped to 39.1 percent while usage of Point of Sale machines has increased 41 percent. ATMs won’t be going away, but their growth and utilisation is going to fall rapidly. “We had slowed down our branch and ATM plans significantly even before these changes: After demonetisation, the digital drive has accelerated. Will ATMs vanish? I don’t think they will vanish but the means to withdraw money may change. ATM is not a profit centre. It’s a service you give to your customer and you don’t expect to make profit out of it," says Dipak Gupta, joint managing director, Kotak Mahindra Bank. Rather than focusing on ATMs, banks should now focus more on improving their apps and Aadhar-based payment systems. Having a secured and user friendly bank app is what India needs right now.