Has the explosion in UPI led to a decline in ATM usage?

By: Aashna Mishra

According to the State Bank of India (SBI), with every Rs 1 (0.012 USD) rise in transactions made through UPI, there is an 18 paisa (0.0022 USD) fall in debit card transactions, resulting in a decrease in ATM visits from 16 to 8 times a year.

The explosion in digital payments, particularly through UPI is reshaping how Indians transact, potentially leading the country towards a cashless future. The convenience and efficiency of UPI have not only revolutionized online transactions but are also starting to reduce the reliance on traditional cash withdrawals. According to the Reserve Bank of India (RBI), nearly 80% of digital payments in the financial year 2024 were conducted via UPI, signaling a shift in consumer behavior. The number of offsite ATMs in India has seen a notable decline since 2022. By February 2024, there were 92,000 offsite ATMs across the country, a drop from 95,000 in February 2023, and a return to the same figure of 92,000 recorded in February 2022. According to CMS Infosystems, India’s leading logistics company, the average cash withdrawn witnessed a substantial rise of 10.37% in metro areas. Following this was a 3.94% increase in the semi-urban and rural areas (SURU), followed by a 3.73% rise in the semi-metros. This growth reinforces the continued dependence on cash transactions within multiple areas of the country. As per the report, ATM cash withdrawals among metro locations escalated by 37.49%, while SURU observed a rise of 12.50% in ATM cash withdrawals, thus depicting the wide cash usage throughout various regions of the country. This growing trend raises the question: Could India soon embrace a predominantly cashless economy, or would ATMs still be in use?  

The use of digital technology for conducting business activities in India, specifically the use of UPI for placing orders, has witnessed a significant increase. As per a recent survey conducted by the statistics office, the utilization of the internet for business activities, including making UPI payments or placing orders through online platforms, rose to 13.5% from 7.7% in rural areas and to 30.2% from 21.6% in urban areas during 2022-2023. Compared to June, the volume of UPI transactions increased by 3.95% in July, and the value of transactions rose by 2.84%. In the first four months of the current fiscal year (2024-2025), UPI transactions amounted to 80.79 trillion rupees through approximately 55.66 billion transactions. According to RBI data, India’s ATM count decreased by 691 units, bringing the total to 218,815 between March 2023 and March 2024. Despite this reduction, the average monthly volume of cash withdrawals from ATMs rose by approximately 7% albeit from a lower base. This trend suggests that, while fewer ATMs are available, individuals are likely withdrawing larger sums per transaction, indicating a still on rise cash usage patterns.   

According to the State Bank of India (SBI), with every Rs 1 (0.012 USD) rise in transactions made through UPI, there is an 18 paisa (0.0022 USD) fall in debit card transactions, resulting in a decrease in ATM visits from 16 to 8 times a year. Despite the increase in cash withdrawals in certain parts of the country, this trend suggests a gradual decline in ATM usage.  According to the data released by RBI, the total number of on-site and off-site ATMs and CRMs in the country added up to 2,16,352 and UPI transactions added up to 328640389 as of July 2024. Furthermore, it is anticipated that 50% of India’s economy could move towards a non-cash model due to digital tools like UPI facilitating financial transactions. The RBI’s data shows that nearly four out of five digital payments within the country were conducted via UPI during the financial year 2024 (FY24). This points to a potential shift in India’s economic landscape, where digital payments could dominate, leading to a significant reduction in cash withdrawals and eventually transforming India into a cashless economy.