Is the sun setting on ATMs?

With the growing popularity of digital transactions, ATMs are losing their salience

At the Sunday vegetable market, Ap Penjor has a basket on his left hand- full of varieties of vegetables. Holding a phone in his right hand, he asks for the QR code from the vendor to pay for the purchases he has made.

Like Ap Penjor, an increasing number of Bhutanese today are using digital payment systems or Apps like mBOB, mPAY, Tpay, and ePAY, among others. The exponential growth and adoption of digital payment systems have been triggered partly by the Covid-19 and the need for contactless payments.

Consequently, the use of ATMs has declined as there has been a noticeable shift towards the digital mode of payment. While Bhutan was no exception to this, what was exceptional was that the country’s ‘shift’ from ATMs to other modes of electronic payments had begun much before 2019 when the pandemic set in.

According to this year’s second quarter payment system report, there were 2.29mn ATM transactions of Nu 8.37bn.

During this second quarter alone, 1.07mn transactions worth Nu 3.99bn were transacted. Unlike other payment instruments, there is a declining trend for card payments. In terms of volume, the percentage has decreased by 11.93% and the value has decreased by 8.74% compared to the previous quarter.

However, it is important to note that figures during 2020 and 2021 represent the Covid-induced shutdown effects. Irrespective of the Covid lockdowns, ATMs are fast losing their sheen following the onslaught by the two technologically advanced transaction modes – mobile banking and PoS machines.

The number of PoS machines per ATM has almost tripled during 2014-21 in rural areas, and the transactions put through these machines have been equally remarkable.

According to an economist, Dr. Damber S. Kharka, the financial institutes will see a plateauing of demand for ATMs because of the various other payment modes that will come into play shortly.

“The demand for ATMs is unlikely to be affected in the next couple of years,” he said, adding that even in the most advanced countries, where digital banking is popular, cash transactions still take place. Over some time ATM players will also rediscover themselves and offer additional services.

According to him, the increase in PoS terminals will not pose a major threat to ATM players, while one problem with rural areas migrating to mobile payment in large numbers is that not many have smartphones.

Further, the App has “to support the scale of banking facilities including cash deposit, bills payment, funds transfer, tax deposits, mobile recharge, etc.”

Meanwhile, the government, however, is pushing hard for higher penetration of digital banking so that the nation moves towards a cashless economy.

A total of 53.90mn mobile and internet banking transactions (excluding QR payment) worth Nu 144.09 has been transacted as of the second quarter this year. It is an increase of 2.39% by volume and 22.34% by value.

According to the report, there were a total of 423,262 registered mobile banking subscribers of which 84% are active users as of June this year and there were 48,809 new subscriptions.

The percentage increase in the users is 10.38%. While there were a total of 28,892 internet banking subscribers, 176 new users were boarded by the banks.

According to Dr. Damber S. Kharka, with such a smartphone payment system, the money is only numbers these days.

“The most important thing is security, movability, and ease of use,” he said.

He added that the ATM services can be availed from an automated teller machine, a computerized device that provides customers the facility of accessing their bank accounts.

Meanwhile, Ap Penjor is happy as he finishes making payment to the vendor through his mobile phone. “Using mobile banking and payment system apps is far better than using cash daily,” he added.

Kinley Yonten from Thimphu