As one walks into the boardroom of Hitachi Payment Services located in the posh technology hub of Mumbai suburb Goregaon, there’s a board hanging in a corner which reads ‘MoneySpot,’ the brand name under which it operates the white label cash dispensing business in India. It was supposed to be a money spinner, but after many years into the business, nearly 700 ‘MoneySpot’ outlets, or half its total, have vanished in the past year.The business of automated teller machines (ATMs), which was marketed as ‘Any Time Money’ to convey its convenience, is staring at a crisis. What was once thought to be a vital component of the banking industry, is now being relegated to the margins. “A lot of people have been talking about ATMs, but the fact is—as we move towards digital, we are examining ATM transactions for the banking system and even for us, (we see it) going down,” says Aditya Puri, chief executive of HDFC Bank , which became the most valuable bank by building its customer reach through ATMs in the early days.The number of ATMs, which nearly doubled between 2012 (around one lakh) and 2015, is stagnating around 2 lakh and has hardly shown any growth in the past six months. The number of debit card transactions on ATMs has collapsed to an average of 660 million a month from over 750 million before demonetisation.From around eight white label operators, which are non-banking institutions deploying ATMs, only three have put up a reasonable number of machines aggregating around 10,000. Those active among them are loss-making.The ATM industry , just like any other, is facing its moment of truth. While former Federal Reserve Chairman Paul Volcker declared ATMs as the only useful innovation of the financial services industry at the peak of the Global Financial Crisis, these could be at the threshold of slowly becoming history.In India, ATMs are not only challenged by technological developments in payments and smartphones, but also by regulatory issues, squabbling between banks on how to split the cost and demonetisation--which changed the paradigm. “Customers are doing more and more transactions digitally,” says Rajiv Anand, executive director at Axis Bank. “An interesting statistic for us is that the value of transactions that we are doing on our mobile phones is now more than the value of transactions we are doing on the ATMs.”The widening reach of smartphones and point-ofsale (PoS) terminals is making cash less relevant.The number of PoS terminals jumped to 2.7 million in June from 1.5 million in November last year. Mobile banking transactions surged to 390 million in 2015-16 from 53 million in 2012-13, data from the regulator shows. The advent of wallets such as Paytm, which can be used to pay from bubble gums to television sets, has made the younger generation skip cash payments.The lowering of interchange fee in 2012-13, the fee X bank pays to Y bank for its customers using the ATM of Y bank, poured cold water on the profitability of ATMs. The interchange fee was brought down to Rs 15 per transaction from Rs 18. “At various forums these concerns have been raised, starting from the department of financial services to the Reserve Bank and even the Indian Banks’ Association, but no decision on revising the rates has been taken yet,” says Navroze Dastur, managing director for India and South Asia at NCR Corporation, the largest deployer of ATMs in India.An ATM was first deployed at a Barclays Bank branch in London and it reached India in 1987. This was the time when foreign banks were using them to quickly expand their footprint in India. Like most new gadgets, it was for the rich and powerful in the beginning.In a tightly regulated banking market like India, where foreign banks are not permitted to open branches freely, ATMs became a tool to reach out to customers.When liberalisation gave birth to banks such as HDFC Bank, IndusInd Bank, ICICI Bank, and Axis Bank (erstwhile UTI Bank), they copied global banks to acquire customers quickly. But the biggest growth phase came when state-run banks realised that without ATMs their customers were moving to rivals and interchange fee had become a drain.“From product differentiation, customer acquisition became the next pillar for the ATM industry,” says Loney Antony, managing director of Hitachi Payment Services. “In the period between 1997 and 1998, PSBs were thinking that a human teller was cheaper than a machine. Then they migrated to the strategy around retention of customers.” When the cost of installing ATMs soared, came the concept of shared services between banks. Then emerged the pay per use model, where the ATM companies said they will be setting up the ATM point, installing the machine and managing them, but the branding will be of the bank which will pay on per use basis. The industry referred to it as the ‘brown label model’.No other policy maker gave the kind of impetus to the ATM industry the way Prime Minister Narendra Modi did with his Jan Dhan programme, where every household was provided with a bank account and a RuPay debit card.That pushed the total number of debit cards in the system to more than 550 million in 2014-15 from 331 million in 2012-13, thereby increasing the chance of card swipes at ATMs.The government’s Jan Dhan programme, which was a gift turned out to be a short-term celebration as the move towards digitisation robbed the ATM industry of its business. The launch of applications like BHIM (Bharat Interface for Money), licensing of new set of niche banks like payments banks and their strategy of going digital first, reduced ATMs’ relevance.“Our expansion of ATMs is a little slow,” says K Venkataraman, chief executive at Karur Vysya Bank. “The demand for ATMs in the long run, we expect, could be less as people shift more to the digital channels and cash usage may be coming down.’’But all may not be lost as yet. The industry is evolving business models where it could survive by generating more out of cash recycling machines.Cash recyclers are the latest innovation to happen to the ATM industry. These machines can both accept and dispense cash. Recyclers do have an advantage of being a multipurpose machine, but the problem is that they hardly find the right balance between deposits and withdrawals.“There is no perfect balancing between the cash deployed and the cash withdrawn at these recyclers.Hence, even with recyclers the cash in transit companies will be needed,” said Ravi Goyal, managing director of AGS Transact Technologies, which deploys, installs and manages around 60,000 ATMs.Furthermore, the cost is prohibitive and that is forcing some manufacturers to set up facilities here.“Manufacturing in India can reduce the cost of these machines. Recyclers had started at Rs 15 to 20 lakh per machine, and this has come down to about Rs 7 lakh already,” says Antony of Hitachi.While price is a major concern, utilisation is also important. As State Bank of India’s chief operating officer Neeraj Vyas puts it, though they have around 250 in-touch branches, major activity reported there is still cash withdrawals, while other facilities are hardly being used. Bankers believe upgrade of these machines may not be sufficient enough for them to buy more of them.The ATM industry may be trying out many ways to remain a viable business, but it may well be the industry’s Walkman moment.