Were you around when India’s first ATM was installed? It was close to 40 years ago in Mumbai, when the first one was set up by HSBC. And since then, you’re probably heard the joke about how the acronym for Automatic Teller Machine conveniently, also, stands for “Any Time Money”. At the time, it was cool, because by visiting a physical bank, a person could get access to their funds at any time.
But, a lot has changed since 1987. The total UPI transactions surged to almost 175 billion in 2024, compared to close to 120 billion in the previous year. You may have heard of how UPI and digital payments may have hurt the candy business. But, could this have reduced the need for ATMs, as well?
Because it seems like banks are shutting down more ATMs than ever before. According to the RBI, it’s said that the number of ATMs in India fell from about 219,000 in September 2023 to about 215,000 in September 2024. Is this just because of digital payments?
Could the scaling down of ATMs be taking place assuming they’re expensive to deploy and maintain, especially when the area is a bit more remote? Are security and transportation paramount concerns? Cash carrying? Plus, if the ATMs are off-site, what are the rental costs and maintenance fees? Could financial institutions be looking at ATMs as way too expensive in 2025? According to the RBI’s website, banks should offer savings bank account holders a minimum of 5 free financial transactions in a month, irrespective of where the ATM is located. Plus, if customers could use ATMs of other banks, that might further dilute profit margins. Though, in 2021, it’s said that the interchange fee on ATM transactions was raised from ₹15 to ₹17. Big whoopee.
There’s, also, something called micro-ATMs, which are portable and low-maintenance devices, which offer some basic banking services. These might be considered a lifeline in rural and semi-urban areas, where a full-fledged ATM isn’t feasible. According to The CapTable, these devices have gone from close to 1.8 million devices in January 2025 to close to 1.5 million in November 2024. And interestingly, ATM penetration in India is said to remain low with 15 machines available for 100,000 people.
And this seems to be happening at a time when there’s an all-time high in cash circulation in India. So, even while UPI has gained significant traction, cash might still be key currently for a significant portion of India’s population. It’s said that cash-based transactions accounted for close to 90% of all payments in FY2022 with cash circulation representing close to 15% of India’s GDP. So, it’s the kind of paradox that might raise your eyebrows: digital payments are surging, but cash usage stays high.
So, at a time like this, is it time for digital payment platforms to step up and make the unbanked banked? Is there any good in physically killing off tangible cash, if digital payments eliminate the logistical challenges of cash management? But, maybe, some may still see physical cash as trustworthy. Maybe, spending through UPI doesn’t make you cognizant of how much money you are spending. If digital payments become the sole way of transacting, could Internet outages disrupt the economy?
The next time you’re buying something, how are you transacting?
