Has the government’s Digital Payment Initiative failed? PwC report says people dependent on ATMs. Low rural penetration a major factor.
According to a recent PwC report, Automatic teller machines (ATMs) are the backbone of India’s financial inclusion drive and need to remain significant. The report stated that ATM machines need to stay relevant within the digital payment’s system with central bank’s support. Vivek Iyer, partner for financial services at PwC reportedly told media that the lack of ATMs will not do any good to the country’s economy as digital payment haven’t met the financial service requirements in remote areas.
Vivek Iyer also stated that the cash demand is still quite strong and banks need to invest in the ATM infrastructure to prevent cash hoarding. He said that a strong support is needed from the Reserve Bank of India to cut down costs and ATM installation doesn’t go down which is currently 50% more than digital infrastructure. A balance must be maintained between both the payment modes which is possible by opening up regulatory sandboxes for ATMs. This will allow the manufacturers and fin-tech startups to collaborate, Vivel added. The PwC report stated that the 2016 demonetization lead to a 0.76% drop in the ATM transaction while a 3.3% fall in the amount of cash withdrawn per month.
The government pushed its digital payment initiative and encouraged people to go cashless. The debit and credit card payments increased by 5.5% and the amount paid through these cards by 4%, revealed the PwC report. Online payments were embraced after demonetization pulled out over 85% of the cash in circulation. At present, cash in circulation has returned but digital payments are strongly being adopted.
Digital payment initiative was immediately adopted and seemed to make payments easier. It has become a hassle free way of clearing and making payments. People find it comfortable and the government’s push towards encouraging it seemed right. Although there are certain areas where this method cannot be easily adopted and reasons are many. Remote villages and rural areas still need ATM machines to withdraw cash and make payments.
As Vivek Iyer said in the report, some innovation needs to be added in the ATM industry using Machine Learning and Artificial Intelligence. He added that the new technology can more efficiently predict cash requirements at terminals.