MICRO ATM

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Introduction

• Micro ATM is a mini version of an ATM. Micro ATMs are like the modified point of sales terminals this terminal can connect to banking networks via GPRS to perform banking transactions.
• This machine contains a card swipe facility. This initiative aims to bridge the gap between the need and availability of cash requirement in the eco-system.

In a nutshell,

• Micro ATM or Mini ATM machine is a portable, handheld card swipe terminal used to dispense cash, in locations where bank ATMs cannot reach. A Mini ATM operates as a unique “Bank-in-a Box”, allowing customers to withdraw cash and know their balance.
• This payment solution is aimed at taking branchless banking to the last mile. Micro ATMs, just as the name suggests, are smaller portable versions of ATMs and can help you boost your income with minimal investment as the Micro ATM price is very less and earnings are high.

Micro ATMs - Delving deeper

• Micro ATMs are card swipe machines through which bankscan remotely connect to their core banking system.
• This machine comes with a fingerprint scanner attached to it. In other words, micro ATMs are handheld point of sale terminals used to disburse cash in remote locations where bank branches cannot reach.
• Micro ATMs are similar to point of sale (PoS) terminals and are a doorstep mobile banking arrangement cum-mobile ATM device.
• They also facilitate cardless money disbursal, using the Aadhaar-enabled payment system (AePS) at remote locations. 

How is it more convenient?

1. 1. According to bankers, the cost of deployment of a micro-ATM is lesser than that of an ordinary ATM. ATMs need at least 80-100 transactions a day to be viable as they cost several lakhs. A micro-ATM costs less than Rs 20,000. (cite copy, and link).
2. It is portable.
3. Micro ATM has connectivity through GSM; hence it can travel from village to village.

Disadvantages:

1. Micro ATM cannot provide 'anytime' money. Hence, if the bank correspondent is unavailable or the shopkeeper has shut his shop, the account holder will not be able to undertake any financial transaction.

How does Micro ATM work?

• Bank will assign a correspondent who will sign up customers in remote areas after verifying their identity (fingerprint can be used as an authentication tool for rural people).
• The fingerprint and personal details may also be linked to the Aadhaar Card, which will then serve as the ID proof required to withdraw money.

Micro ATMs in India

• The year 2022 saw a rapid rise in micro ATMs being deployed across the country.
• According to data from the Reserve Bank of India (RBI), there exists 19 lakh micro ATMs across the country as of December 2022. However, there was no significant rise in the value of money withdrawn through these devices since June last year

The trend

• At the end of 2020, there were just about 3.56 lakh micro ATMs in India. In December 2021, it rose to 5.9 lakh. The number more than doubled to reach a whopping 14.19 lakh in December 2022, show data.
• Meanwhile, cash withdrawals worth ₹19.67-lakh crore were done in December 2020. In December 2021, it was ₹25.2-lakh crore, and grew to only about ₹25.5-lakh crore by November 2022, when the number of micro ATMs stood at 13.3 lakh. This also means that the value of transactions per micro ATM per month is also going down. The cash withdrawal numbers for December are yet to be released.
• However, this wasn’t the trend all the time. During the pandemic, the value of cash withdrawal through micro ATMs grew multifold. While it was ₹1,17,086 crore in FY20, it grew 92 per cent to ₹2,25,041 crore in the next financial year. In FY22, it was at ₹2,99,776 crore.
• Of India’s 14.19 lakh micro ATMs, almost a quarter — 3.55 lakh — are deployed by Fino payments bank. SBM Bank India Ltd has deployed 3.3 lakh of them, and the third biggest player is NSDL Payments Bank with 2.25 lakh devices.

How are Micro-ATMs filling the gaps created by traditional ATMs models?

• The distribution of traditional ATMs within India is unbalanced, urban areas having 69 ATMs per one lakh population, semi-urban areas having 53 ATMs per one lakh population and the rural areas having a meagre 9 ATMs per one lakh population. When compared to its global counterparts, India is among the countries to have the lowest ATM penetration in the world.
• Over 65% of the Indian population resides in rural India, yet, they account for only 20% of all ATMs in the country. People in rural areas face a huge problem in cash withdrawal due to the unavailability of ATMs or banks nearby. 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. And, this is one of the main reasons why Micro ATMs have been gaining traction steadily by filling in the gaps created by the traditional ATMs.
• Additionally, with the surge in AePS transactions in recent years, along with the pandemic, Micro ATMs have been gaining more popularity. Many FinTechs are working on Micro ATMs and expanding the market by offering financial services to the unserved and underserved population and making primary banking services easily accessible in remote areas.
• The Micro ATMs, in the rural areas, come as a respite for people who usually have to travel long distances just to access the nearest ATM or a bank. These handheld machines can be set up at local shops and can use the same cash box of these shops, keeping the cash flow consistent and available at all times.

How are Micro-ATMs increasing cash-flow in unbanked rural and semi-urban areas?

• The growth and success of any economy today depends on access to the formal financial and digital ecosystem by all sections of society. During this pandemic, one thing became clear – rural India was and continues to be a cash-driven economy. With cash being the primary mode of transaction in rural India, ensuring a continuous flow of cash is essential to keeping the rural economy operational.
• Now, when the rural communities have difficulty in accessing ATMs, such challenges continue to slow down the provision of basic banking amenities to this segment of the population. This is where rural fintech players are helping bridge the gap by expanding the network of Micro ATMs to the last mile customer.
• 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.
• Micro ATMs were instrumental in facilitating cash withdrawals during the current pandemic, especially for the withdrawal of the government’s disbursement of ₹ 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 increasing the cash-flow at the last mile.

Can we expect more facilities in future from Micro ATMs?

• The journey for Micro ATMs has just started, and already, it is creating huge waves in the Indian economy. They are an ideal backup for enabling essential cash transactions when the traditional ATMs run dry. Further, Micro ATMs are more viable than conventional ATMs due to low infrastructure cost and operational efficiency through mobile connectivity.
• Today, advanced Micro ATMs come equipped with modern facilities like chip-reading provide all conventional ATM facilities such as accepting debit cards, making balance inquiries and generating a mini statement.
• The rise in Micro ATM and other digital payment transactions are indicative of the huge latent demand that exists for easy to use digital payment technology across the country, especially in tier II and beyond regions.

What has led to the sharp growth in setup of Micro ATMs over traditional ATMs?

• Micro ATMs are game-changers in the way in the way they carry out transactions. They aim to bridge the gap between customers and their financial needs.
• The lack of banking infrastructure in rural regions – which often rely on cash – often results in a sizable demand-supply issue. That is why Micro ATM penetration is growing rapidly in these areas.
• As they are portable and easy to use, they go a long way in improving banking access for the underbanked. Additionally, these POS machines provide many financial services, including cash deposits, cash withdrawals, fund transfers, and eKYC-based saving account openings, which makes them a robust and efficient payments solution in sparsely populated regions.
• The advantages of Micro ATMs in a digitized economy are manifold. Apart from their potential widespread reach, these POS devices can be easily installed and used at almost any location, such as grocery and kirana stores, making it easy and convenient to be used by customers. Furthermore, installing a Micro ATM also helps increase a merchant’s income with additional revenue. For every transaction, the merchant gets a fixed commission – depending on the distributor and the banks.

Closing Thoughts

• As India moves towards achieving its vision of being a digital economy, Micro ATMs 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.

 

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