Shutting Down Own ATMs: Will This Be A New Trend In Banking?

Several Founders, Co-Founders, CXO Bankers, CXO Fintech professional & people who participated in the ePanel discussions:

Mr. Vijay Shekhar Sharma, Founder & CEO, Paytm
Mr. Rajiv Rai, Former Chief Digital Officer, Edelweiss Financial Services
Mr. Sheoji Meena, Former Director, Bank of India Uganda Limited
Mr. Neeraj Chandra, Head of Operations and Technology, India, Abu Dhabi Commercial Bank
Mr. Dhanender Chandna, Managing Director, Viren Business Solutions Pvt Ltd.
Mr. Sharad Goklani, President and CTO at AU Small Finance Bank
Mr. P B Prakash, Head-Financial Institutions Group, IndusInd Bank
Mr. R Bhaskaran, Strategic Training Advisor in Banking & Finance
Mr. Shreejith Menon, Senior Director, IDFC FIRST Bank
Mr. Vishweshwaran R, Senior Vice President – Digital and Customer journeys, IDFC FIRST Bank
Mr. Hitesh Thakkar, Fintech Consultant, Self-Service Automation
Mr. Subbiaa Olimuthu, former Product Manager RuPay Product, NPCI
Mr. Jayaram M, Consultant (Partner), Basil Capital
Mr. Narayanan S, General Manager Business Solutions, Associate Director, Principal Consultant, Cognizant
Mr. C V Ramana Rao, Sr Manager, Punjab National Bank
Mr. Rakesh Shetty, Product Head Micro Loans, Fortune Credit Capital Ltd
Mr. Maunil Gajjar, Manager Projects, Aurionpro
Mr. Amit Sukhija, Senior VP, AU Small Finance Bank
Mr. Rohit Kilam, CTO, CMS Info Systems
Mr. Ruchir Inamdar, Head of Business Development, Repute
Mr. Rajesh Bhojwani, CEO and MD, RBB Ship Chartering
Mr. Amarto Chakrabarty, Manager, Deloitte India
Mr. Abhishek Arun, Chief Operating Officer, Paytm Payments Bank
Mr. Saurabh Sharma, Head-Consumer Banking, India, DOHA Bank
Mr. Roopesh Chandran, Director – Fintech, Processors and Business Excellence at Visa
Mr. Abhishek Mody, Vice President, M2P Fintech
Mr. Rakesh Bhanusali, National Head- NR Business, AU Small Finance Bank
Mr. Ramasubramanian S, Deputy Vice President, Axis Bank
Mr. Dheemant Thacker, Head-Digital Banking, Ujjivan Small Finance Bank Limited
Mr. Vikas R Panditrao, Co-Founder, Forum of Industry and Academic Knowledge Sharing (FIAKS)
Many other CEO/CXO Bankers & Fintech professionals on FIAKS Forum requested to remain anonymous

Here’s discussions on the news articles that came in media in September 2021:

Seems here’s the root cause of this decision;

They are just shutting their own ATM and nothing else. Managing 10-15 ATMs from their branches and a couple of off branch premises is also not very relevant. Today as a customer you have a minimum number of free ATM access per month.
Recently RBI has come up with a circular that any ATM cash out for over 10 hours in a month will be fined 10,000 per ATM ^[1]When RBI announced the penalty some people were appreciating that without actually understanding where it will lead to. The result will be, banks will start closing down ATM machines that are far off, where they are not going to get too many footfalls. The result will be fewer cash options for the customer.
What Suryoday SFB has done is a logical step given the economics of ATM running forced by the RBI for offus transactions (offus transactions refers to where the issuing bank and acquiring bank are different entities). But, if everybody did this, it would mean the end of ATMs!
This is supposed to happen with RBI penalizing banks for not keeping adequate cash in ATM machines. No bank would be interested in keeping ATM machines where they will not be in a position to refill cash considering the cost of replenishing cash and maintenance of ATM machines. Instead, it will be cheaper for them to give more free transactions.
With increased regulatory imperatives (and hence increased costs) on ATMs, it’s difficult for relatively smaller banks to operate ATMs profitably. Anyways when customers mostly end up using other banks’ ATMs, a lot of small banks may evaluate the need to have ATMs. Isn’t it for branding or a banking service tool? As per a member’s opinion, “cannot take a call on shutting completely, should be open to selectively install from branding perspective on a prominent location eg- a big mall. Also if they crack a big alliance, ATM may be one of the deliverables. I think they would be internally open on a case-to-case basis.”
We need to remember that already banks were running on break-even point, the addition of penalty clause by RBI makes bank goto negative.

Was it a wise decision?

Member feels the game on ATMs has shifted. No longer is having ATMs a plus. What is more relevant is providing access to ATMs. Do we care whether Uber/Ola have their own cars or the fact that they allow us access to cars?
Secondly, aren’t we making a mountain out of a molehill. It’s like saying if one bank closes, all banks will be closing soon. Consider this – Suryoday had only 26 ATMs, of which only 1 offline. ATMs offer bank opportunities to connect with non-account holders and for branding, which in Suryoday’s case were non-existent. Given the extra hassles on ATMs, seems it was a wise decision!
Also, what’s the big deal in being ATMless? ATMs are like SUVs- pretty, compact, can handle loads and loads but they are gas guzzlers without a doubt. And so, given the cost of operations of a physical branch vis-a-vis an ATM vis-a-vis a mobile app, there are banks that are now even branchless, so what’s the big deal in being ATMless!

Let’s see a different perspective put forth;

This is not about Suryoday bank. But generally Small Finance Banks. I apprehend that they will

(a) pay hefty salaries

(b) make IPO at good to high premium so that promoting exit with profit

(d)The foreign investors who are with them from NBFC days will get a high return on their investment (much more than what they can get in their countries where interest rates are negative) and yet claim happily as to how they help the poor and that ‘what is important is the availability of funds and not ROI’

Eventually, some of the Small Finance Banks could merge with big banks. So who will lose?- Shareholders, Depositors

Another significant thought leadership forecast;

RBI, obviously, does not like this and if a couple of more banks were to follow suit, they might come up with a rule mandating a certain ratio of own ATMs per customer, etc.

Now let’s walk through some of the concerns raised by the community

Question 1: With the rise in digital transactions do you feel ATM machines are no longer a core part of the digital strategy of banks?

Though digital transactions are on the rise ATM still serves a large section of the population and with biometric-enabled ATMs and cardless withdrawal and deposits, ATMs are not just cash vending machines. There are a host of services that one can perform at ATMs (cheque-book issue etc.) So, ATMs are very much part of the strategy whether owned or white label. ATMs will become the banks of the future as more branches close. [White label ATMs are set-up, owned, and operated by non-banks]