12 October 2017

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The Changing Dynamics of the ATM Market
The demonetization drive in November 2016, led to a huge drop in amount withdrawn from ATM’s as withdrawal limits were put in place, and currency was not available. Once the cash availability improved, the transaction volumes s have rebounded as withdrawal limits were relaxed since March 2017, even though additional charges were placed on the number of ATM withdrawals. The transaction costs imposed by banks is changing the consumer behavior, as per transaction volume has been increasing.

  ATM Transactions- Volumes (Million)
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  ATM Transactions- Value (Rs. Billion)
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  Per Transaction Amount (Quarterly Average)
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  Growth in ATM's (YoY)
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A noteworthy trend was that the transaction amount being handled by SBI ATMs has increased in general. However, the trend for private banks like HDFC did not pick up at the same pace. This could possibly indicate that the existing huge base of issued debit cards at SBI, had a very low usage pattern earlier and demonetization forced many people to use ATM and digital modes of transactions for the first time. We expect this trend to soon become habit forming and increase hereon.

 SBI vs HDFC- ATM Transactions by Value (Monthly Market Share)
Image Source: Decimal Point Analytics. * SBI data includes merged associates for all periods
 SBI vs HDFC- ATM Transaction Volume Market share (Monthly)
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Going forward, one needs to be watchful of other modes of digital transactions as well and its influence on ATM transactions. A noteworthy trend is seen that since demonetization the availability of point-of-sale (POS) terminals and online transactions have risen substantially while the growth in ATM machines have slowed down. We will discuss the trends in POS more in detail in our next weekly letter. Another factor to look out for, is the deployment of white label ATM’s in rural areas for financial inclusion. With the RBI promising a review regarding the White label ATM guidelines and players voicing concern regarding low interchange fees, the White label industry might be in for an overhaul. An emerging trend is merchant outlets such as Big Bazaar now allow consumers to withdraw cash at the POS (also without making a purchase). Although the amount the consumers can withdraw at such merchant outlets is not a very big (mostly below Rs. 2000), this will be a welcome move as customers will not have to queue up at banks and ATM and also not pay ATM charges. The changing face of ATM industry will largely be driven by evolution in technology and developments in consumer habits. It remains to be seen if the government emphasis on reduction in cash usage becomes successful in the long run.

 

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