Why ATM, when you can crypto!

The world celebrated 50 years of the automated teller machine in 2017. In its 51st year, it is seems that ATMs are headed for extinction. In India the usage of ATMs is plateauing even as their number declines. The Reserve Bank of India’s (RBI) data shows that the number of ATMs in 2017-18 was 2,22,066, marginally less than the previous year. This number slipped further to 2,11,255  ATMs in June 2018. The trend is clear, ATMs are in decline. While cash is still sloshing around the system, the options of extracting cash are reducing gradually. Banks have quietly begun to shrink their ATM network as cost of installing, maintaining and protecting them remain high. 

Since their launch in 1987, ATMs changed the way India banked. Banking is changing as new options are replacing old practices. The newly launched India Post Payment Bank (IPPB) hasn’t bothered to issue an ATM card that consumers had grown so comfortable with. IPPB has declared that it will issue QR cards that will work on bio-metric identification. 

The biometric authenticated QR Code on the card will allow IPPB representatives (postmen mostly) to scan the QR code using mobile devices and offer cash to customers in distant locations. This step could also soon be copied by other banks. As new forms of digital payments take root, the dependence on cash (still high) is expected to plateau and reduce in the next few years. IPPB is working to connect retailers, small traders and local stores in communities that were highly dependent on cash. Many of them are familiar with phone based payment systems. Soon a customer will be able to pay directly from the bank account authenticated by bio-metrics and QR code. With no intermediary, the cost of transaction would be lower than existing systems. 

Biometric based financial transaction is not the only revolution that Indian banking is facing. From QR Cards to Crypto is not a very long hop. While IPPB will cater to the bottom 500 million of the country, the top few million could soon have the option of using crypto-currencies for real world product purchases. 

A crypto currency is digital money. Not yet recognised by most central banks, but the concept is similar. A digital unit which has a value for real world transactions.  Indonesian company Pundi X has run pilot projects using point of sale machines for retail transactions in Hong Kong. The company has plans to expand in Asia, including India, as soon as regulation allows it. 

Here is the key issue then. Central banks across the world will have to move fast to keep up with the change. As the old ways of managing and spending money decline, new options are proliferating. Biometric based payment may be easy to manage under current regulatory environment, but central banks have to wake up to digital currencies soon. The World Economic Forum is working with central banks to help them frame appropriate policies for regulating cryptocurrencies. 

India is still to make up its mind on cryptocurrencies. The RBI and the Finance Ministry still have valid reservations but they must be aggressive in finding a way to promote new technology with adequate safeguards. These institutions should be open to exploring new and unfamiliar technologies. 

Cryptocurrency may not be the best option for India, but it marks the direction of the evolution of finance and banking. Unless we try it, we will not know what will work. In future, banks may not even have to issue a card. With face recognition, perhaps a smile would be enough to transact. We should be ready for such developments.