Micro ATMs: Driving digital economy in rural India

The growth and success of any economy today depends on access to the formal financial and digital ecosystem by all sections of society. During the Covid-19 pandemic, one thing has become clear - rural India was and continues to be a cash-driven economy.

India is among the few rising economies with a low ATM penetration rate. There are over 650,000 villages in India, but only one ATM for every ten villages.

As per World Bank, India had 20.95 ATMs per 100,000 adults in 2019, a low figure compared to other nations. The distribution of ATMs within India is highly unbalanced, with metros having 53 ATMs per one lakh population, and the rural areas having a meagre nine ATMs per one lakh population. Over 65% of the Indian population resides in rural India, yet, they account for only 20% of all ATMs in the country.

The cost of infrastructure acquisition and servicing is one of the main reasons that formal financial institutions find it difficult to operate ATMs in rural areas. This is one of the main reasons why Micro ATMs have been gaining traction steadily by filling the gaps created by the traditional ATMs.

Rural communities having difficulty in accessing ATMs poses a challenge to provide basic banking amenities to this segment of the population. For ATM cash withdrawals, Micro ATMs are a game-changer for Indian consumers, especially the marginalised population located in Tier I, Tier II cities, and beyond.

Micro ATM offers cash withdrawal facilities to the customers without needing them to visit a physical bank branch or an ATM centre. This reflects in the cash withdrawals from Micro ATMs, which amounted to Rs 26,830 crores in August 2021, compared to Rs 19,513 crores a year ago.

Micro ATMs were instrumental in facilitating cash withdrawals during the pandemic, especially for the withdrawal of the government’s disbursement of Rs 1.75 lakh crores into Jan Dhan accounts of workers, labourers, and farmers, among others, who were out of work and needed cash. By ensuring all citizens have access to cash all the time, even beyond banking hours, Micro ATMs are aiding the last mile.

In addition, as India moves towards achieving its vision of being a digital economy, they will play an increasingly crucial role in accelerating the reach of basic banking operations by connecting the vulnerable sections of our society. Micro ATMs are more viable than conventional ATMs due to low infrastructure cost and operational efficiency through mobile connectivity. With fintech players partnering with neighbourhood retail stores, high-end technology is being simplified for last-mile consumption.

The steep rise in volume of Micro ATMs and other digital payment transactions are indicative of the huge latent demand that exists for easy-to-use digital payment technology across the country.

While Bharat is adapting to getting financial services through their trusted local stores, we need to port this local trust and layer it with the right tools, training and technology to universalise digital banking in the country.

(The writer is the Founder of PayNearby)

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