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Growth and Development of ATM in India

Article  in  Asian Journal of Research in Banking and Finance · January 2018

DOI: 10.5958/2249-7323.2018.00007.X

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 GROWTH AND DEVELOPMENT OF ATM IN INDIA
Mr. Ram Raj G,

Post Graduate Research Scholar, Christ, Bengaluru-India.

ABSTRACT

This paper examines the various types of Automated Teller Machines(ATMs) in India.
This study also examines the growth and usage of Automated Teller Machine in Indian
banking sector. This study declares that there is an immense growth in Indian ATM service
and positively increasing a number of public using Automated Teller Machine every day.
There are nearly ten types of Automated Teller Machines which is available for use in Indian
banking sector in the current scenario.

Keywords: Automated Teller Machines, ATM -Technology, Types of ATM, Growth of

ATM, Usage of ATM.

INTRODUCTION

In today’s business world, every individual wants to develop and expand their
businesses. To sustain their business in the existing modern and globalised world, people in
business employ smart work to achieve their common goal of fast growth and huge profits.
The financial service sector is one of the major fastest growing industries in the world
economy. The development of the financial sector in a country is critically necessary for the
rapid growth of the economy. The growth of the financial sector is dependent on the progress
of various intermediary banking and non-banking institutions existing in the country. Hence
there is a prerequisite for banking sectors to divert their objectives from their existing goal of
consistent profits to growth-oriented, future plans. This can be achieved by the banking sector
by adopting technology in the business which will result in innovation. One such innovation
in the banking sector is automated teller machine (ATM) which is widely accepted by all
banks. Even though technological developments like mobile banking and internet banking
have helped in completely reforming the banking sector, ATMs remain to be an important
factor in the sector.

The Indian financial system is the most massive growing sector in the country. The
country has adopted technological innovation on a regular basis to implement change in its
business. ATM plays an essential role in India especially when the country is trying to
achieve the status of complete financial inclusion. The evolution and the development can be
implemented successfully only when the customer is supportive and satisfied. The customer
satisfaction can be achieved only when the bank premises gratify the expectation of the
customer through their user-friendly, solution seeking ideas which can be better achieved
through technology rather than their bank employees. This paper throws light on the recent
development and growth in ATMs in the Indian financial sector.

AUTOMATED TELLER MACHINE

 The machine is known by the name Automated Teller Machine(ATM) in some
countries and Automated Banking Machine(ABM) in other countries(Canada). It is also
notorious by different names like a cash machine, cash point, mini bank, cash dispenser
machine, etc. The primary function of an ATM is financial transactions, particularly
withdrawal of money for the public from their personal account without using any human
resources like a clerk, cashier, etc. These devices are user-friendly with comprehensible
software which can be accessed by all. The ATM also has an electronic display to guide
procedures step by step to the ignorant customers. It operates on 24*7 basis to help the
customer to withdraw money based on their requirement.

This machine can also be used for various other functions like cash balance
verification, mini statement of account, transferring money from customer account to another
account holder without any manual interface, paying additional charges like loan and
insurance premium, etc. The ATM card looks like a plastic smart card with a magnetic strip
and a microchip and contains a unique card number for individual customers. It also contains
other details like date of expiry and CVV (Card Verification Value) code, for security
purposes. A personal identification number (PIN) is provided to every customer for
authentication. This ATM card can be utilized for all financial transactions like shopping bill
payment (a point on sale), cinema ticket booking, mobile recharge and other several other
purposes.

REVIEW OF LITERATURE

(Moutinho & Meidan, 1989) states that technological development leads to the usage
of a new product like ATM. It helps in reducing the usage of the bank and interaction
between the banker and the customer.

(Davies, Moutinho & Curry, 1996) states that ATMs act as a mediator between the
banker and the customer. It also acts as a connecting device between persons and artificial
intelligence. (Jetley, 2004) The technological development in various sectors illustrates the
need for new innovative concepts like ATM in the banking sector as well. The advancement
in ATMs in the recent times is shown through the environment friendly approaches adopt by
the banks such as solar power ATM centres. Solar power ATM centres will become a
necessity in the near future as India is suffering from the lack of adequate supply of
electricity in most of its areas. Power is the biggest barrier for the development of ATMs in
India.

(Choodambigai, 2011) This study aims to find the usage of ATM among the
customers. The result is that most of the customers use ATM for withdrawal of their money
and very few of them use to verify the account details. This study only concentrates on public
sector banks. The paper also aims to study credit card and ATM services based on customers’
perception.

(Kumar, 2011) This study expresses the reason for increasing usage of ATM in India.
The ability to provide major facilities like bill payment, money transfer and other financial
services helps to customers to save their time. The trust prevalent over the ATMs is high that
the customers do not even count after withdrawing their cash from the machine.

(Tuli, Khatri & Yadav, 2012) This study aims to compare public sector and private
sector bank ATMs, usage and other facilities. Only two banks- SBI and ICICI were taken for
the study. The result reveals that the public-sector bank dispenses old currencies and private
sector bank run out of cash most of the times. Thus, both the banks have their limitations. The
paper does not consider the bank employee perspectives and concentrate only on the
customers who are using the ATM. (Premalatha & Sundaram, 2012) The primary concern of
this paper is about customer satisfaction while using ATM, and it has been found there is a
significant effect on age factor and safety, gender and tangibility. But there is no significant
relation between occupation and satisfaction level. So, it is concluded that the customers
expect safety, assurance and convenience while using ATM and suggests to the banker to
provide safety and accurate information to the ATM users to increase reliability. (Bishnoi,
2013) The paper shows the increase in the usage of ATM customers but lacks to find out the
reasons and factors for the same.

(Renuka & Paulraj, 2014) This study concentrates on customers satisfaction at the
point of withdrawal, 24 hours and on the deposit system. But there is lack of awareness
among the customers while using ATM. It is suggested to the bankers that ratifying
customers’ comments, doubts and suggestions will increase the reputation of the bank among
the customers.

(Sisat & Barbuddhe, 2014) This paper explains the various threats to ATM and Cash
Deposit machine. There are three types of risks involved while using the ATM, which are
currency fraud, logical attacks and physical damages. This paper explains the security system
of ATM and CDM.

OBJECTIVE OF THE STUDY

• To depict the recent developments of ATM in India.

• To analyse the growth of ATM usage onsite and offsite in the Indian Banking Industry.

RESEARCH METHODOLOGY

This study is wholly based on secondary data. All the data were sourced from Reserve
Bank of India database. The time period of the ATM statistical report taken ranges from 2011
to 2017 and only the report for March month was taken for the study. Other sources include
articles from various recognized journals, periodical articles, monthly magazines, and web.
This paper employed percentage analysis to find out the growth of ATM sectors in India.

FINDINGS AND DISCUSSION

I - Recent Development of ATM in India

The growth of Indian economic system in the past decade is found to grow at a rapid
rate. Banking industries in the financial sector are introducing a new concept on a regular
basis to attract the customers. The first ATM in India was presented by HSBC bank in 1987
at Mumbai branch for withdrawal. The ATM was introduced with an objective to serve the
customers during emergency situations where cash deposits and withdrawals after regular
banking hours are required. The next development in the ATM field is the introduction of an
enquiry system to know the account balance and statement so that the customers do not waste
time waiting inside the bank premises. Many significant changes like account transfer from
one-person account to another account holders, requisition claims like chequebook need,
message alert etc. were noted after 2000. After 2010, technological developments increased
in ATM non-banking services. Such services include bill payments, ticket bookings, mobile
recharges, etc. Even though many developments have been introduced in the sector, much
more should be brought in to increase the quality of ATM services in India. Few such
changes are as follows:

1. White Label ATM

White Label ATMs can be set up and operated by private, non-banking entities. As
per RBI guidelines, the bank which operates ATMs must have minimum net worth amount of
1 Crore. This type of ATM operator is permitted to use all kind of bank ATM cards, and are
also allowed to display their advertisement on the ATM counter. The operator must have a
sponsor bank who will provide money for their ATMs. As per RBI rules, the company is not
permitted to use any logo or name of the sponsor bank in the ATM centre. They can also
provide a lot of value-added services like bill payment, recharge, etc. with a maximum
withdrawn limit Rs. 10,000. These ATMs function 24/7. As per RBI guidelines, minimum two
ATM centres are mandatory in 3 to 6 tiers and if the bank desires, one ATM can be installed
in the 1 & 2 tier cities. Following table shows the details of the tier cities.
Table 1
Details of population categories
CATEGORIES TYPE TIER POPULATION
Metropolitan 1 10 Lakhs and above
Urban 1 1 Lakh and above
Semi-Urban 2 50,000 to 99,999
Semi-Urban 3 20,000 to 49,999
Semi-Urban 4 10,000 to 19,999
Rural 5 5,000 to 9,999
Rural 6 Less than 5,000
2. Brown Label ATM

Brown label ATMs can be taken on lease under the ownership of the service provider.
They are responsible for seeking a place for ATM centre and negotiating with the landlord.
They must also arrange for the electrical power supply, network system, interior decoration
and ATM centre maintenance worker. They can use the logo and name of the sponsor bank
who maintains the cash management and connectivity. This ATM follows the outsourcing
concept where all the activities are done by the third person. The service providers collect
their charges form the bank. The main advantage of this ATM is that the bankers need not
worry about external factors and huge investment in the ATM centre.

3. Online ATM
Online ATM relates to a bank database where all the details like amount withdrawal
limit, balances, etc. are monitored by the bank.

4. Offline ATM
This offline ATM are not connected with the bank database, but the bank fixes this
type of transaction predefined withdrawal limit, we can withdrawal the money more than our
balance amount later we must pay the penalty for over withdrawal to bank

5. Onsite ATM
The onsite ATM are which is in branch premises itself or very close to branch

6. Offsite ATM
The offsite ATM is located far away from the branch premises usually in public
places like shopping complex, bus stand, airport and other major places.

7. Mobile ATM

Mobile ATM refers to the ATM which can be easily moved from one place to another
place for the benefit of customers during festival times, religious functions, etc. They are
highly mobile and operate only during the required days.

8. Green Label ATM

This type of ATM can be used only for agricultural transactions.

9. Pink Label ATM

Pink Label ATM can be used by women for their transactions.

10. Other ATMs

The orange and Yellow label can be used for share trading and other e-commerce
purposes.

II - Growth of ATM in India

The RBI database regarding ATM installation for the past eight years for the month of March
is given below in Table 2
Table 2
Number of ATM
YEAR ON-SITE OFF-SITE
2011 41,268 34,377
 2012 47,545 48,141
2013 55,760 58,254
2014 83,379 76,676
2015 89,061 92,337
2016 1,01,950 97,149
2017 1,09,809 98,545
Source: (RBI DATABASE)

The above table gives details about the number of ATMs available in India. As per the table
during 2011 (March) only 41,268 onsite ATM and 34,377 offsite ATM were present. But
according to the latest report of March 2017, there are nearly 1.1 lakhs onsite ATM and 1
lakh offsite ATM in India depicting the high increase in the number of ATMs within a short
span of 6 years. The graph for the above data is as follows:

Graph 1

Number of ATM
1,20,000

1,00,000

80,000

60,000

40,000

20,000

0
2011 2012 2013 2014 2015 2016 2017
ON-SITE 41,268 47,545 55,760 83,379 89,061 1,01,950 1,09,809
OFF-SITE 34,377 48,141 58,254 76,676 92,337 97,149 98,545

Source: (RBI DATABASE)

It is analysed from the graph that on-site ATM is more than the offsite ATM every year. But
in the year 2013, the offsite ATM is higher than the onsite ATMs which means that the banks
had installed ATMs in public places other than the bank premises for the benefit and
convenience of the customer.

III - Usage of ATM in India

The following details were extracted from the RBI database for the past eight years. The
ATM card usage details taken are depicting in the table below:

Table 3
Number of Transaction in India

YEAR ATM POS

2011 39,95,53,342 2,24,61,539
 2012 47,10,31,623 3,06,68,922
2013 48,20,04,645 4,53,76,619
2014 57,14,97,661 5,69,81,333
2015 62,42,05,135 7,61,05,726
2016 73,17,22,405 11,28,68,336
2017 71,01,08,656 27,11,72,292
Source: (RBI DATABASE)

The above table 3 expresses the number of ATM transactions in India. ATM depicts the cash
withdrawal directly from the ATM centre while POS depicts the swiping of the card at the
place of sale. POS helps the customers to carry less amount and with high safety. There is a
considerable increase in POS transactions in 2017 as compared to 2011. The usage of POS
transactions has increased 15 times while ATM transactions how only two times increase.
The following graph 2 explains the number of transactions in India.

Graph 2

TRANSACTION
80,00,00,000
70,00,00,000
60,00,00,000
50,00,00,000
40,00,00,000
30,00,00,000
20,00,00,000
10,00,00,000
0
2011 2012 2013 2014 2015 2016 2017
ATM 39,95,53, 47,10,31, 48,20,04, 57,14,97, 62,42,05, 73,17,22, 71,01,08,
POS 2,24,61,5 3,06,68,9 4,53,76,6 5,69,81,3 7,61,05,7 11,28,68, 27,11,72,

Source: (RBI DATABASE)

The graph 2 expresses the number of ATM card transactions in ATM centres and point on
sale machines. During the year 2016, the number of ATM centre usages were very high due
to the effect of demonetization. The point on sale(POS) had increased at a rapid rate during
the current year 2017. Every customer who has adopted the digital India system prefers
cashless transactions.

CONCLUSION

This study is conducted using descriptive analysis with a focus on the types, rate and
growth of ATM usage among the bank customers in India. The results obtained show that
there is a high growth in the usage of Indian ATMs, especially after the demonetization
scheme. It was also found that the awareness level about cashless transactions among the
public is significantly growing high in the past few years. Adequate measures need to be
 taken by the Government to abolish the level of ignorance existing among the users, which
will help in increasing the awareness and interest to accept and adopt technological
developments in Indian banking sector among the public. It is the joint responsibility of the
Government and public to drift the country in the trail of cashless economy.

REFERENCE

Bishnoi, S. (2013). An Empirical Study of Customers Perception regarding Automated Teller Machine in Delhi
and NCR. Integral Review, 47-60.

Choodambigai, S. (2011). Customer Satisfaction of Credit Cards and ATm services of SBI in Coimbatore.
International Journal of Exclusive Management Research, 1-11.

Davies, F., Moutinho, L., & Curry, B. (1996). ATM User Attitudes: A Neural Network Analysis. Marketing
Intelligence & Planning, 26-32.

Jetley, N. (2004, April 0). Solar ATMs changing the face of banking in India. India: CNBC.

Kumar, S. (2011, March 6). India Riding the ATM wave. Hindustan Times.

Moutinho, L., & Meidan, A. (1989). Bank Customers' Perceptions, innovation and new technology.
International Journal of Bank Marketing, 22-27.

Premalatha, J. R., & Sundaram, N. (2012). Analysis of Customer Satisfaction with reference to ATM services in
Vellore District. IJMER.

Renuka, R., & Paulraj, A. (2014). Customers' Satisfaction towards Automated Teller Machine. Indian Journal
of Applied Research, 333-336.

Sisat, S., & Barbuddhe, V. (2014). Secured Automatic Teller Machine and Cash Deposit Machine. International
Journal of Advance Research In Computer Science and Management Studies, 118-121

Tuli, R., Khatri, A., & Yadav, A. (2012). A Comparative Study of Customer attitudes towards ATM of SBI and
ICICI Banks. International Journal of Marketing and Technology, 463-470.

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