In order to meet clients, we often have to travel to smaller towns in India with population below 1mn. One of the most noticeable things about these small towns is how much harder it has become in the last couple of years to get cash from ATMs. Initially, we used to think this was because of demonetisation. Two years on we realised that something more fundamental has happened. This article describes the same phenomenon in the more remote parts of Scotland. Basically, what’s happening is the opposite of “network effects” i.e. as in the busy parts of the country, people are replacing cash with digital money, it is become less and less viable for banks to run ATMs and branches. However, since the banks dare not pull back significantly on ATMs and branches in the big cities, they are doing so in the countryside where, unfortunately, people are less able – due to age, literacy, etc – to migrate to digital money. This article’s description of the Scottish countryside is likely to soon apply to swathes of the Indian countryside.
“An average of 460 cash machines vanished every month in 2018, and the country has fewer than 8,000 bank branches now, down from nearly 18,000 in 1989. Around 1,500 previously banked towns no longer have one.
The angst in these villages and towns shows that a swath of people can’t, or don’t want to, leave the analog world behind, even as the number of ways to manage money online is exploding. And they have a point: Research shows that online finance isn’t yet a full replacement for its physical predecessor. Banks like RBS, Lloyds, and Barclays, meanwhile, are under pressure from impatient shareholders to cut costs, as digital rivals brag about their lack of costly physical branch networks.
In banks’ eagerness to embrace more profitable digital alternatives, they are scrapping branches and ATMs faster than society is ready for. As they retreat, the UK is becoming a laboratory for what the rest of the developed world can expect as financial apps rise and storefronts get boarded up”
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Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.
Copyright © 2022 Marcellus Investment Managers Pvt Ltd, All rights reserved.