FINTECH FOCUS: ATMs
Balls t the ATM netw rk! Ron Delnevo of Cash & Card Consultants argues that a simple solution to the dwindling number of ATMs is staring the UK government in the face. It can solve the access-to-cash lottery… through the National Lottery! HM Treasury has just concluded yet another consultation on issues connected with access to cash in the UK. Concerns about access to cash are of fairly recent origin for residents of this small island. Until 2017, the number of free-to-use ATMs, which dispense more than 90 per cent of the cash used for day-to-day payments, had been increasing every year since 1998 – from 24,500 to 54,500. However, just beneath the surface of this apparently wholly satisfactory situation, trouble was brewing. In fact, it had been brewing for many years and it’s not difficult to understand why. All ATMs in the UK are connected to the LINK ATM Network (LINK), which is funded by UK banks by way of a small payment per cash withdrawal by their customers to other banks and non-bank operators. Until the dawn of the new millennium, INK was basically a bank club and the payments made for ATM cash withdrawals were fairly well-balanced between them all. No bank faced significant net outgoings. Then, independent ATM deployers (IADs) joined LINK. They realised that they could make a decent profit by operating free-to-use ATMs to supply bank customers with the cash they wanted. Over the next decade or so, IADs installed thousands of ATMs, improving access to cash for tens of millions of people. But it meant that some banks now faced substantial net outgoings. The methodology for calculating what should be paid, per ATM cash withdrawal, had been agreed by the UK competition authorities in 2001 and, every year, accounting firm KPMG used it to calculate what the payment per cash withdrawal would be for the next 12 months. It was fair and transparent, but of no consolation
18
ThePaytechMagazine | Issue 10
to those banks that were paying more each year for ATM services. This went on for years, with the banks stymied in their attempts to reduce their outgoings by the threat of regulatory action against them. The threat of regulatory intervention faded somewhat over the years, and, eventually, the banks were able to bring about changes. The organisational structure of LINK was altered and, crucially, a new LINK board replaced the previous members’ council , with the power to set payments for cash withdrawals as it saw fit, whatever findings KPMG produced. Unsurprisingly, perhaps, payments for cash withdrawals were reduced. This reduction had an immediate and continuing impact on ATM numbers. Free-to-use ATMs that were deemed by operators to be no longer profitable, were either removed or switched to pay-to-use. Today, there are only around 41,000 free-to-use ATMs in the UK, a 25 per cent fall in only four years, and numbers continue to decline. ATMs are not only being lost because they are unprofitable, of course. Every time another bank branch closes, on average another two ATMs go. At the current rate of reduction in free-to-use ATM numbers, within five years there could be as few ATMs as there were before the IADs appeared on the scene. So, where does all this leave the Treasury’s latest consultation? It has suggested that ‘designated firms’ will be made responsible, by law, for ensuring that access to cash in the UK meets some yet-to-be-agreed minimum standard. Some of those firms are the same banks that have been reluctant to meet the costs of cash withdrawals through LINK for the last 20
years: they would be asked to do something they patently do not want to do and, even more assuredly, don’t want to fund. The Financial Conduct Authority (FCA) is the regulator mooted to have oversight of the designated firms under these new arrangements. But the FCA has many irons in the fire in relation to the UK’s big banks. There is surely a danger that, at some point, the banks will be excused some or all of their obligations in relation to cash, in exchange for doing something in another sector of financial services that the FCA may consider expedient to prioritise. The issue of cash access could easily become a mere bargaining chip. Free UK public the access to cash has a significant disadvantage in that, whatever form it takes – old-style cashback, access at post office counters, community shared banking hubs, and, of course, ATMs – all require banks to meet the bill. So, what can be done to ensure that cash, a pillar of personal freedoms, independence and choice for a mere 2,500 years, does not get removed from the payment choice menu? One solution is available: access to cash can be provided under the auspices of the UK National Lottery. Camelot, the current operator, has been keen to offer financial services before, but was knocked back by a regulator that may have believed community financial services, including cash access, were at that time relatively well catered for. Now is surely time for the Lottery regulator to have a rethink. Thousands of communities have lost all local access to financial services in the last few years. www.fintechf.com
