I agree that not many people are using Bitcoin ATMs because of several important reasons. Main problems are privacy issues and high fees which have made people not want to use them. Instead of this they prefer to use online trading platforms. Privacy means not only keeping transactions safe and personal information protected but also being worried about laws that could let authorities watch what people are doing with their money.
I would like to say an opposite fact than your post, most people don't care about privacy and use online trading platforms don't secure their privacy. Most centralized platforms nowadays have mandatory KYC before you can full access their services and use account with full features.
People dislike Bitcoin ATMs because of anonymity and expensive fee. When they come to a Bitcoin ATM and use it, their anonymity gone and they can face with physical attacks after that. Privacy and anonymity are very different and your post sounds like you misunderstood privacy and anonymity.
People don't care about privacy but perhaps they care about anonymity that is related to their life safety.
Yes, it's the expensive fee that goes with it. And how ironic when we try to compare fiat to Bitcoin as better options, come expensive fees when we try to transact using ATM's. Maybe others will just try for the experience, but other than that, we have like a better more cheaper options to buy and sell our Bitcoin.
As for KYC, it's already mandatory, every entities requires KYC now, exchanges, gambling sites and others. So I don't think that is the main problem. Of course there are still people who wanted to protect their anonymity, but I guess majority now has embrace KYC as part of Bitcoin market.