No sunset on ATMs

October 1 will usher in a new dawn in Suryoday Small Finance Bank. Quite literally. The four-and-a-half-year-old bank has decided to close all its ATMs from that day. The logic: an overwhelming share of its 14 lakh customers have switched to UPI. Suryoday’s decision will also bring a new dawn for the Indian banking industry since this young bank will be the first one to dispense with ATMs altogether.

The apparently perfect business logic could become dangerous for the common people if, in a fit of myopia, more and more boardrooms of banks find the idea acceptable. It is true that UPI transactions are rising fast in the country both by volume and value. In June 2021, 2.8 billion transactions were recorded worth Rs 5,47,373 crore which was a 10.6% jump by volume and 11.56% by value when compared with that in the preceding month, the worst Covid-hit month in the second wave. It is also true that UPI has brought extreme convenience in transactions and will be adopted more and more by the younger generation. Since the government is pushing UPI, it will grow even faster due to a conducive ecosystem.

However, that does not, by any way, reduce the significance of ATMs. In end-July there were 213,000 ATMs in the country which was 1.5% more than the number at the corresponding time in 2020. Apart from the obvious flaw in comparing the growth trajectory of two technologies that are at two different stages of their life cycle, the reality is that a huge section of the Indian citizens are dependent on ATMs for their regular banking needs. From withdrawing cash to placing an order for a cheque book, they visit the ATMs more frequently than they ever used to visit a branch before ATMs became popular.

It is quite impossible for senior citizens to adapt to UPI for every small transaction and the entire thing is critically dependent on internet services which is not consistently stable in all corners of the country. Moreover, contrary to expectations, the need for cash has risen in recent times and life without ATMs would have been unthinkable during the pandemic.

Bank authorities should keep in mind that ATMs keep millions of customers away from their branches. Had they crowded in the small premises, they would have to deploy thousands of more people to service them. Since they were introduced back in the 1980s, ATMs have been one of the most significant structural changes in the banking services in independent India. The banking regulator and the government must be aware of this fact. Else, a small step by Suryoday might turn into a giant mistake in the Indian banking space.