ATMs Are Passe; They May Become Relics Of Our Cash-Intensive Past

The law of unintended consequences says that the outcomes of purposive actions may occur in unexpected areas.

For months after the demonetisation (DeMo) of high-value notes, the focus of media and popular attention has been on ATMs – whether they are running dry or yielding cash.

But with the slow, but clear, shift to digital payments, it seems ATMs themselves are slowly going out of fashion, and expansions of the ATM network are plateauing.

According to an Economic Times report, the rate of ATM expansion halved in the November 2016-April 2017 period, just when cash demand was peaking. Banks added 3,619 ATMs during this period, down from 7,746 in the corresponding period of 2015-16.

ICICI Bank actually cut the number of ATMs by 744 due to a change in the contract for ATM deployment. SBI saw a cut of 200 ATMs.

The story isn’t the same elsewhere, with HDFC Bank and Axis Bank adding ATM numbers, but there is little doubt that the ATM expansion spree is well past its high point. From a peak of 38 per cent growth in 2009-10, it tumbled to 9 per cent in 2015-16 and to a dismal 4.2 per cent last year, says the ET report.

The reason for our lower need for ATMs may also be the result of the blow dealt to large cash transactions by demonetisation. DeMo brought significant hoards of black money into the formal banking system and dented the invulnerability and anonymity associated with cash. If black money earlier held as cash is now in bank accounts, it makes sense to make payments using these balances rather than stocking up on cash again.

Another unintended consequence of demonetisation and the shift to digital is a plateauing in the use of cheques and credit and debit cards. After peaking at Rs 52,220 crore in December 2016, card usage was Rs 45,080 crore in May 2017.

The big shifts in payments are towards mobile payments, Unified Payments Interface (UPI), National Electronics Funds Transfer (NEFT) and Immediate Payment Service (IMPS).

To be sure, ATMs will continue to grow, especially in smaller towns and semi-rural areas.

But in urban areas, ATMs may well become relics of our cash-intensive past.