Unified Payments Interface (UPI), India’s revolutionary digital payments platform, has already transformed how we make payments in India. Now, it is set to disrupt cash withdrawals too. The National Payments Corporation of India (NPCI) has greenlit a groundbreaking initiative: UPI-enabled ATMs. You can leave your debit card at home and withdraw cash using your smartphone.
We recently tested this innovative concept at an ATM in Mumbai. Here’s why UPI cash withdrawals could revolutionise access to money for Indians.
UPI-enabled ATM Withdrawals: New Level of Convenience
The concept of cardless cash withdrawals at ATMs has existed for a while. However, it’s a multi-step process that requires users to create a withdrawal request in their banking app, set up an OTP, and find an ATM of the same bank where they have an account.
Although the system is designed to be convenient, it is more complicated than regular card-based cash withdrawals.
Here’s where UPI comes to the rescue. It removes all the hurdles of cash withdrawals and brings complete interoperability across banks. Let’s look at the advantages of UPI-enabled ATMs:
- Withdraw cash from any bank account.
- Complete the transaction using any UPI app of your choice. For example: PhonePe, Google Pay, Paytm, Amazon Pay, etc.
- No need for OTP or any pre-authorization from your bank.
- Transaction completed in real-time.
Our experience with a UPI-enabled ATM was seamless. All you need is your smartphone with an active internet connection. The machine supported both UPI and regular card-based transactions.
The steps for cash withdrawal were simple. Enter your phone number in the machine, choose the withdrawal amount, and scan the QR code displayed on your screen using any UPI app on your phone. The process takes less than 30 seconds, which is way faster than regular ATM transactions.
Cash withdrawal on ATMs using UPI is now available!
– Enter your phone number in ATM kiosk 🏧
– Scan QR code displayed on screen using any UPI app 📱
– Withdraw cash instantly! 💰– Zero charges for withdrawals up to Rs 1000
– 1% charges on cash deposit pic.twitter.com/VKU5whWnGz— Chinmay Dhumal (@ChinmayDhumal) May 11, 2024
Availability of UPI-enabled ATMs Still Limited
While the NPCI has already approved UPI-based ATM withdrawals, the feature is still not widely available across all ATMs due to some challenges in its infrastructure. Although the machine is identical, the backend for card-based and UPI withdrawals differ massively.
Hence, UPI-based withdrawals are currently mainstream on third-party ATM services that are not associated with legacy banks. For example, the ATM we tested was operated by a third-party entity called K R Dsilva Private Limited.
Another popular example is Hitachi Money Spots, which offers similar services even though it doesn’t run a bank in India. These are called White Label ATMs and are approved by the Reserve Bank of India (RBI).
However, legacy banks like SBI, HDFC, ICICI, Axis, etc., have yet to implement UPI-based withdrawals across their ATM network in the country. Although their existing machines are UPI-ready, banks have not shown keen interest in enabling the functionality.
Although third-party ATM services offer the convenience of UPI cash withdrawals, they charge a small service fee for transactions above Rs 1000. The fee ranges between Rs 10 and Rs 20, depending on your withdrawal amount. It also acts as an entry barrier, as the biggest reason for UPI’s popularity is its free-to-use nature.
UPI Reigns, But Cash Still Wins
India is the global leader in real-time digital payments and accounts for almost half of the total digital transactions in the world through UPI. Despite achieving success across large cities and smaller towns, it is still no match for the ease and comfort of traditional cash.
Even today, business owners are more happy to accept cash than online payments. This is because accepting online payments involves extra charges for the soundbox and the merchant QR code. Some businesses continue to remain cash-only to evade taxes, which, although unethical, is still inevitable.
Cash is still an important part of the Indian economy, and UPI cannot completely replace it. Both payment instruments will co-exist in the market without threatening the other. Hence, cash withdrawal using UPI in ATMs is a game changer as it perfectly binds digital payments and cash.
UPI will act as a saviour when you require cash but don’t have access to a debit card or partner bank ATM for cardless withdrawal. The sheer convenience of UPI in ATMs has the potential to make this a grand success in years to come.
