Rise Of Digital Transactions Leads To ATM Decline
The banking sector in India is witnessing a paradoxical trend. Despite the amount of cash in circulation reaching an all-time high of Rs 34.70 lakh crore, banks are shutting down automated teller machines (ATMs) at an alarming rate.
According to Reserve Bank of India (RBI) data, the number of ATMs decreased from 219,000 in 2023 to 215,000 in September 2024. The decline is primarily seen in off-site ATMs, which are not located within bank branches.
Their numbers dropped from 97,072 in September 2022 to 87,638 in September 2024 as this reduction coincides with a monumental increase in cash circulation which has risen by 100% since demonetisation.
The main reason behind this trend is the changing consumer preference for digital transactions, particularly the Unified Payments Interface (UPI).
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As per the data, with 89% of transactions still in cash India’s economy remains heavily dependent on physical currency. However, the RBI’s regulations limiting free ATM transactions, ATM interoperability, and slow growth of interchange fees make the ATM business unprofitable.
A 2022 RBI study revealed that India has only 15 ATMs per 100,000 inhabitants, indicating low ATM penetration. This scarcity is particularly concerning in rural areas where access to digital payment systems is limited due to network issues and other kerfuffles.
Data in 2021 shows that in just six years, India’s banking arena has undergone a remarkable transformation. Digital transactions have surged from a mere 15% to a staggering 75% of all banking financial transactions.
This shift is largely driven by the rise of the Unified Payments Interface (UPI), mobile banking, and Internet banking.
75% of banking financial transactions are now DIGITAL .. it was only 15% – just 6 years ago
UPI, Mobile and Internet banking lead the transformation
Cheque and ATM volumes REDUCE by 15-25% annually.
(BCG) pic.twitter.com/YyGZPZo2mE
— Mihir Vora (@theMihirV) June 28, 2021
Cheque volumes have decreased by 15-25% annually, while ATM transactions have also seen a similar decline which indicates a changing consumer behaviour with people increasingly depending on digital payment solutions.
Digital transactions will supersede transactions at ATM by 2022. The contribution of digital payment instruments (such as retail electronic clearing, mWallet, & mobile banking) has doubled in 2016-17 & will grow further by the end of FY17-18, from 32% in 2013-14 to 62% in 2017-18. pic.twitter.com/Qq1K697do7
— Dhanraj Nathwani (@DhanrajNathwani) December 30, 2017
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