A Correlational Study of the Usage Trend of Cards at ATM and POS of various types of Banks

Dr. Paritosh Dube

Faculty of Commerce & Management
Kalinga University, Naya Raipur

E-banking has been said to be progressing at a very fast rate. Various reports have come up that state that different modes of E-banking have increased at a very fast pace. In a research paper[1] E-banking and its growth in India – A synoptic view  Suhas. D &  H N. Ramesh studied various modes of E-banking. Their studies revealed that the installation of ATMs grew by a CAGR of 12.31 % from April 2013 to April 2018. They studied the data of respective April months of 2013 – 2018. Their study also revealed that the total debit card outstanding for the same period grew at a CAGR of 22% and the growth in Credit Cards was recorded at a CAGR of 14%.  The NEFT registered a CAGR of 38% and 43% in terms of Volume and Value. However, the RTGS CAGR was much low at 13% and 7% for the same period for Volume and Value.[2]An article puts the global online banking market at $ 11.43 billion which is estimated to reach $ 31.81 billion by 2027 registering a CAGR of 13.61% from 2020 – 2027.[3] An online article by Indian express outlines the following data concerning RBI Reports:

Particular

Growth Rate in 2018-19

Growth Rate in 2017-18

Total digital transactions (in volume)

58.8

50.4

Total digital transactions in value

19.5

22.2

The retail component of digital transactions in Volume

59.3

50.8

The retail component of digital transactions in Value

38.42

45.8

However, the picture is not all rosy. An online article by Business standard raises doubts about the position of ATMs in the country. It provides the following facts to support this concern

  1. Number of ATMs reduced by 544 whereas the number of POS increased by 6.4 lakhs by March 2019.
  2. Axis Bank closed more than 2000 ATM’s and State Bank of India and Bank of India both closed more than 1000 ATMs.
  3. Out of 49 Banks 30 Banks closed ATMs.

The Confederation of ATM Industry (CATMI) is highly troubled due to this fact. They see it as a sign where the access to cash would be reduced, especially to the rural people, as ATM numbers reduce. But the real question is has the usage in the volume of credit and debit cards an ideal indictor of their access concerning their usage by the common populace? Would not a study of Change in Debit and credit card usage at ATM and POS concerning both Volume and Value of transaction provide us with a better perspective?

Table 1 shows the Correlation factor of Credit and Debit Cards concerning ATM & POS Number of Transactions as compared to Amount of Transaction From 2017-2021 for different types of Banks

 

Type of Bank

Credit Cards Correlation Factor

Debit Cards Correlation Factor

Between ATM No. of Transaction and Amount of transaction

Between POS No. of Transaction and Amount of Transaction

Between ATM No. of Transaction and Amount of transaction

Between POS No. of Transaction and Amount of Transaction

Public Sector Banks

-0.33

0.88

-0.92

0.48

Private Sector Banks

0.24

0.98

0.40

0.93

Foreign Banks

0.76

-0.88

-0.66

-0.74

Payment Banks

0.00

0.00

1.00

-0.87

Small Finance Banks

0.00

0.00

0.87

1.00

Source: Compiled and Calculated by the author on basis of RBI data for the said period [4][5][6][7][8]

It is this question that the article strives to address. As such reports were studied from the RBI database from 2017 to 2021 and the data corresponding to March every year was obtained. The data so obtained and tabulated revealed the following findings after application of the correlation tool:

Credit Cards

ATM

Concerning Public Sector banks, we find that there is a negative correlation

(-0.33) as the number of Credit cards usage at ATM decreased but the Value of transactions Increased more than 10 folds (809 million to 8240 million). In the case of Private Sector banks, we find that the correlation factor is Positive (0.24) as both the number of transaction (252240 to 302549) and the Value of transaction has increased (1155 to 15573) in millions. However, value growth was more pronounced.

An analysis of Foreign Banks reveals that there is a high correlation factor (0.76) between the number of Transactions (54164 to 94824) and the Value of ATM Transaction (326 million to 6838 million). However, we have no data on usage trend for Payment’s bank or the Small Finance Bank

POS

Concerning Public Sector banks, we find that there is a High Positive correlation (0.88) as the number of Credit Cards usage at POS increased 3 times and also the Value of transactions increased more than 25times. In the case of Private Sector banks, we find that the correlation factor is still more Positive (0.98) as both the number of transactions (61515802 to 122740929) and the Value of transactions have increased (187491 to 4934643) in millions. However, value growth was little more than volume.

An analysis of Foreign Banks reveals that there is a high negative correlation factor (-0.88) between the number of Transactions and the Value of ATM Transactions. However, this is because the value growth is there even though there was a fall in the number of transactions. However, we have no data on usage trends for Payment’s bank or the Small Finance bank. Thus, these two types of banks did not issue any credit cards.

Debit Cards

ATM

Concerning Public Sector banks, we find that there is a high negative correlation (-0.92) as the number of Debit cards usage at ATMs decreased by 27% but the Value of transactions Increased by 11.40 times. This means that even with the lowered number of transactions people are still depending on ATMs more than POS as Public sector Banks account for about the majority of banking transactions. In the case of Private Sector banks, we find that the correlation factor is Positive (0.40) as both the number of transaction and the Value of transaction has increased. However, value growth was more pronounced as the growth of Value was almost 15 times more whereas in volume it was only 1.34 times over the years as depicted in RBI Data.

An analysis of Foreign Banks reveals that there is a high negative correlation factor (-0.66) between the number of Transactions and the Value of an ATM. This is because in the recent 2 years the number of transactions fell drastically even though the value continued to rise. This might be due to the effect of COVID. In the case of Payments Bank, we find that there is an almost perfect positive correlation as growth in volume and value of ATM transactions has matched each other. However, this data relates to only the last 3 years. In the case of Small Finance Banks, we have a high Positive correlation (0.87). There is a growth of both value and volume in ATM transactions. Overall we can say that in respect of ATM even though there was a decrease in the transaction for Public Sector banks and Foreign Sector banks yet the value of Transaction continued to grow over the years 2017 – 2021 

POS

Concerning Public Sector banks, we find that there is a medium level of Positive correlation (0.48) as the number of Debit cards usage at POS increased 1.39 times and also the Value of transaction Increased more than 17 times thus, growth was more prominent in the case of value than volume in case of POS. But we must realize that for debit cards POS growth rate is more than ATM in Public Sector banks.

An analysis of Private Sector Banks reveals that there is a high positive correlation factor (0.93) between several Transactions and the Value of ATM Transactions. However, this is because the growth in value and volume is there and value increased by 20, 16 times whereas volume increased by 1.38 times. Once again there was more increase in POS as compared to ATM value even though the transaction growth rate was almost similar.

In the case of Foreign Banks, we find that the correlation factor is highly negative

(-0.76) as the number of transactions has decreased slightly by 21% and the Value of transactions has increased by 9. 43 times.  However, in this case, the response of ATM is better than the POS as the decrease is less in transactions and the value growth is more.

In the case of Payments bank, the data is relevant for the period of 3 years (2018 – 2019 to 2020 – 2021) as these only started functioning in 2018 – 2019. We find that there is a high negative correlation (-0.87) which is because the transaction number declined by 20% whereas their usage increased by 11.73 times over the years. In this case, even though POS registered a decline in total transactions and registered a smaller growth in value terms as compared yet their per transactional value it registered a growth as compared to ATM transactional value.

In the case of a small Finance bank, the data is relevant for the period of 3 years (2018 – 2019 to 2020 – 2021) as these only started functioning in 2018 – 2019. We find that there is a high positive correlation (1.00) which is because the transaction number increased by 2 times, whereas their usage increased by 14.85 times over the years. In this case, even though POS registered an increase in total transactions and registered a huge growth in value terms as compared as such their per-transactional value also registered a growth as compared to ATM transactional value.

Thus we find that in the case of both ATM and POS

  1. The growth has happened in terms of the value of transaction over the years both for Debit and Credit Cards
  2. In certain cases, especially concerning ATM the total transactions volume has decreased in both Debit and Credit cards
  3. The negative correlation exists in the case of Public Sector Banks, Foreign Banks, and Payments Banks. Thus, we can say that number of declines in the volume of transactions for both types of cards happened in the case of these banks only. In the case of Private Sector Banks and Small Finance banks, there was a positive growth only.

Reference

Webliography

  1. https://www.ipinnovative.com/journal-article-file/8000
  2. https://indianexpress.com/article/business/economy/digital-transactions-set-to-rise-four-times-by-2021-reserve-bank-of-india-5783553/

3.https://www.business-standard.com/article/economy-policy/number-of-atms-dips-pos-centres-see-rise-in-digital-payments-push-119060101291_1.html

4.https://www.rbi.org.in/Scripts/ATMView.aspx?atmid=121

  1. https://www.rbi.org.in/Scripts/ATMView.aspx?atmid=109
  2. https://www.rbi.org.in/Scripts/ATMView.aspx?atmid=97
  3. https://www.rbi.org.in/Scripts/ATMView.aspx?atmid=85
  4. https://www.rbi.org.in/Scripts/ATMView.aspx?atmid=73

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