Traditionally, banks have been the foundation of financial services, facilitating everything from loans and transactions to savings. They have continuously changed to satisfy the needs of a rising economy by adapting to numerous technological breakthroughs over time. The adoption of online banking services by Indian banks has advanced significantly in recent years, which has led to a move away from more conventional services like Automated Teller Machines (ATMs). ATM usage in India has become a contradiction in recent times as a trend that focused on putting up more and more ATMs has switched towards closing a significant number of them. In the modern world, we see the use and need for ATMs decreasing which is shocking dating back to the era when ATMs had just been introduced. Such a transformation does not come out of place but is a result of major changes within the banking sector thanks to the growth of digital invoicing and other technologies that have transformed the industry altogether. In this article, we try to identify why Banks are shutting down ATMs and what are the Changing Face of Banking
The Decline of ATMs: A Paradigm Shift in Banking
The Automated Teller Machine (ATM) was certainly a breakthrough in the past, primarily because it allowed money access 24 × 7. Yet, now this notion is fast becoming obsolete with the introduction of electronic alternatives like Unified Payments Interface (UPI). As per the data from the Reserve Bank of India, the number of ATMs in the country by the end of September 2024 decreased to 215,000 from 219,000 a year ago. Bank managers have been shutting down several of their branches which failed to fetch profits or show much use by customers, therefore, this negative trend is due to changes in consumer preference, tech advancement, and costings
Impact of Online Payment Methods
With the rise of UPI and analogous services, it seems that satisfaction with ATM usage has also decreased. Instead of going to the ATM to withdraw cash, UPI can do it faster for users by enabling them to conduct transactions electronically with just a few clicks. The increasing inclination towards this payment mode has enabled a greater number, of transactions as opposed to cash withdrawals at ATMs instead. Therefore there has been a decline in the number of visits to ATMs making it less viable for the banks to keep them in high numbers.
Furthermore, as a result of this, users have come to use mobile applications for banking and digital wallets to perform transactions remotely. The increased popularity of QR code payments and contactless payments has decreased the demand for ATM usage for cash withdrawals. This transition to a cashless society has forced the banks to re-evaluate the efficiency of ATMs.
High Maintenance Costs
After cash replenishment, machine maintenance, security, and power supply, deploying ATMs is inherently costly. In these cash-disengaged rural and remote areas, the costs involved can sometimes trump the revenues garnered, particularly in areas where the footfalls are few. The cost of maintenance continues to rise for those machines, with lesser throughput prompting several banks to either shut down those ventures or spin-off quite a number of them.
Banking in recent years has undergone much transformation-a lot of which has entailed heightened compliance demands, to such an extent that banks may shudder at the thought of ATMs in less competitive, cash-disengaged environments. The Reserve Bank of India instituted tighter ATM security regulations that mandate constructing video surveillance systems and a slew of other upgrades to prevent fraudulent activities. Such legislation presses the active compliance point that translates into a shortfall of financial gain and has translated to a disincentive for banks to cater where returns are lukewarmly present.
Changing Consumer Preferences
India’s changing demographics have been a reason for the declining usage of ATMs since the younger tech-savvy crowd is in favor of digital banking as opposed to traditional forms. Mobile banking and UPI present millennials and GenZ with the most congenial options for financial transactions. This change in consumer preferences largely due to generational risks has resulted in a dip in cash withdrawal demands, thus rendering ATMs far less relevant.
During the COVID-19 pandemic, digital payments have been hastened, since using cash would increase the possibility of infection. Although the pandemic hurriedly receded, the usage of digital methods persisted beyond the pandemic years.
Role of Banking Correspondents
Increasingly, the role of banking correspondents (BCs) is growing in rural areas where access to banking services is limited. Banking correspondents, acting as the face of a bank, render as services simple as deposits, withdrawals, and opening accounts without requiring the proximity of bank branches or ATMs. Due to increasing reliance on BCs on one hand and the advent of micro-ATMs on the other, the necessity for installing standard bank ATMs further decreases in rural settings.
Consequences on Rural and Low-Income Groups
The closure of ATMs has raised eyebrows and left others worrying about issues of financial inclusion especially amongst rural areas and low-income populations that do not own smartphones or have stable internet connections to do online banking. Most people within these demographics still rely on ATMs as one of the ways of accessing cash. The fact that ATMs have been closed in rural locations poses a challenge where people are unable to access cash when needed causing an inconvenience to go to the nearest machine or bank branch that is far away.
The Emergence of Micro-ATMs
Micro-ATMs have come up as a viable substitute for traditional ATMs, especially in rural and semi-urban locations. These devices are used by banking correspondents and are capable of making ATM operations like cash withdrawals, deposits, and balance checks. They need lesser running costs and can be deployed in regions where infrastructure is less developed. The introduction of micro ATMs can be attributed to the strategy of tightening operational costs while still rendering services to customers located in remote areas.
