Micro-ATMs

Use of micro-ATMs in rural areas has surged due to increasing demand for cash in rural areas, at a CAGR of
around 200% from financial year 2017 to financial year 2020. While banks are hesitant to make major
investments in installing full-fledged ATMs in remote areas, the business correspondent model has significantly
alleviated the problem of unavailability of digital banking facilities in rural regions through availability of
micro-ATMs. This trend is likely to accelerate in the future, increasing the demand for terminals that support
such transactions.

RBI Initiatives & Regulations

In January 2020, the NPCI approved the removal of interchange fees on UPI and RuPay card transactions. This
move was particularly beneficial to fintech players, and the Gol is planning to offer a fiscal boost for the loss
through MDR.

To enhance deployments of payment POS terminals in non-metro regions of India, the RBI has introduced the
PIDF to encourage acquirers to deploy POS infrastructure in tier three and beyond central and north-eastern
states. The RBI will make an initial contribution of 22,500 million to the PIDF, covering half the fund. The
remaining contribution will be from card-issuing banks and card networks operating in the country.

Various digital incentives have been launched by the RBI to enable more security in digital payments while
including even non-smartphone users in digital payments. For instance, Know your Customer (“KYC”) has been
a value addition in terms of monetary security, codified through the Prevention of Money Laundering Act. By
comparison, cash has no KYC requirements. Recently, the RBI has increased the limit for contactless card
transactions and e-mandates for recurring transactions through cards and UPI from 22,000 million to %5,000
million from January 1, 2021 to further the adoption of digital payments in a safe and secure manner.

AePS is another such initiative from the RBI to allow those without a smartphone to make digital payments
through their Adhaar Card. With a considerable chunk of the country still not using smartphones, especially in
rural areas, this will help promote digital payments among such sections of society.

Number of credit card transactions in India’s payment services market by POS and ATMs for the
financial years 2016-2021 (in millions)

200 2188.1
e 1762.6 1767.4
“oO
sq ve 1405.1
Ze
= 1200 1087.1
cs 785.6
Y§ 700
33
§ 2 200 6 64 78 98 10 51
&
=
= 300 FY16 FY17 FY18 FY19 FY20 FY21

matATMs mat PoS

Source: India Payment Services Market Outlook to 2026, Ken Research, August 2021)

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