It was in 1967 that the first Automated Teller Machine was installed at a Barclays Bank branch in London. The world owes a lot to John Shepherd Barron, the inventor of the ATM. This machine has now become commonplace in most parts of the world today.
The ATM has metamorphosed from a clunky, standalone contraption to a sleek-faced, multi-networked, IoT-enabled device that can do many more things than just dispensing cash. Today, ATMs have evolved into multi-function kiosks enabled for contactless cash dispensing, cash deposits, account opening and even debit cards issuance.
ATMs came to India somewhere in the 1980s through the branches of foreign banks and were the most coveted and awe-inspiring technology marvels of that period. In the early 1990s, a few Indian banks caught on to it and by the mid-1990s, with the setting up of new private sector banks, ATMs started becoming a necessity at all metro and urban branches.
Thanks to the National Financial Switch (NFS) set up in 2004 by IDRBT (Institute for Development and Research in Banking Technology), interoperability between ATMs of various banks became a reality. The NFS network was transferred to NPCI (National Payments Corporation of India) in 2010 and since then, the number of ATMs connected to NFS has grown to more than 251,000 on which 250 million cash withdrawal transactions were performed in May 2021.
Agents of social change
Over the last 20 years, ATMs in India have changed from being an exclusive device for premium customers in urban areas, to being the agents of social change, supporting financial inclusion across towns and remote villages of India. Mass banking could not have been possible in this country without ATMs providing the much-needed cash dispensation points for millions of customers.
Today, ATMs in India together dispense an average of ₹2,600 billion per month, which is more than 10 per cent of the currency in circulation. Banks have effectively used ATMs to provide basic banking services to customers at any time of the day and in a cost-effective manner. ATMs on mobile vans have provided salaries to workers at remote factory locations; these vans have also gone to places affected by natural calamities, providing much needed cash to the population.
ATMs on wheels have driven down to large societies to enable residents to withdraw cash during the lockdown last year. ATMs provide wages to plantation workers in the remote tea estates of Assam. One can never forget the long winding queues at the ATMs in the aftermath of the demonetisation announcement made by the government of India on November 8, 2016.
Demonetisation has been a turning point for ATM growth in India. From more than 8-10 per cent growth year on year in the number of ATMs prior to 2016, the growth has slowed down to 2-3 per cent per annum. But the country still needs a lot more ATMs. As compared to the world average of 50 ATMs per one lakh population, India is way below, at an average of 28 ATMs per one lakh population, even much lower than China, which is at 98 ATMs per one lakh population and Brazil, which is at 105 ATMs per one lakh population.
The distribution of ATMs within India is also very skewed, with metropolitan cities having 53 ATMs per one lakh population, urban areas having 69 ATMs per one lakh population, semi-urban areas having 53 ATMs per one lakh population and the rural areas having a paltry nine ATMs per one lakh population. But over the last few years, the increasing cost of logistics and regulatory compliance for ATMs, and the emergence of digital payment options like UPI, had made banks re-think their ATM deployment strategy.
Banks and independent ATM deployers (IADs) have now realised that ATMs or their advanced version, the ACR (Automated Cash Recycler), are much needed in India, to service the cash requirements of the population. Digital payments, especially UPI, may have grown multi-fold during this period, but cash remains the engine oil of the economy.
In the coming days, we will be seeing ATMs reclaiming their rightful spot as the accelerators of economic and inclusive growth. They will surely jostle for space among the other dispensation models like UPI, micro-ATMs, e-wallets, etc,. but the need of the country is such that there will be enough play for all methods of end point dispensation.
The writer is Senior Vice President - ATM Business, FSS