By Trevor Clawson.
Two years ago, the West Sussex village of Billingshurst boasted three banks on its high street, each with a convenient ATM. And if shoppers were disinclined to use the machines provided by Barclays, Lloyds and Natwest, they could always opt for the “hole in the wall” at the door of the local supermarket.
Things are different today. After a series of branch closures, the bank ATMs have gone. Meanwhile, the supermarket machine is only just coming on stream again after being put out of commission by a ram raid. For a while at least, a relatively prosperous commercial centre has been an ATM-free zone.
It’s an illustration of a problem that is becoming increasingly apparent across large swathes of the country, and particularly in rural areas. Due to commercial pressures, banks are shutting both branches and ATMs, leaving shops and garages to take over the task of dispensing money.
But independently operated cash machines – the type you might find on a shop counter – are also closing. Following a move by banks to scale down the sum paid per transaction to operators – currently standing at 25 pence – some have concluded that running a free-to-use ATM makes no commercial sense. In some cases, ATMs are closing because of criminal activity. Very often, closures are taking place in areas where local people do not have easy access to alternative sources of cash.
Faced with mounting concern, the organisation charged with coordinating the bulk of Britain’s ATM network is taking action. In a move announced last week, LINK said it was introducing new and more generous financial incentives for cash machine operators, with the aim of not only improving coverage but also increasing the number of machines that allow free withdrawals.
The Road To Extinction
There is certainly a problem to be addressed. According to research published this week by Expert Market, there are already 3,000 communities in Britain that no longer have a single bank. Cash machines are also vanishing. The same study finds that the UK is losing around 3,600 ATMs a year. If the decline continues at current rates, the humble cash machine will be extinct by 2040.
There is a bigger context. Card payments are expected to rise from 14.3 billion transactions in 2014 to somewhere around 21.9 billion by 2026. Cash payments, in contrast, are expected to fall by nearly half (46%) over the same period.
In that respect, the decline of the cash machine merely reflects a move towards a card-driven, cashless society. But – and it’s a very big “but” – we are not there yet and many people still depend on money withdrawn from their local hole in the wall to fund their shopping, entertainment and business transactions.
Shoring Up The Market
So LINK is offering a subsidy aimed at ensuring that bank customers living in “deprived areas” can continue to withdraw cash from convenient machines.
With effect from April 1, this year, around 3,500 cash machines – or to be more precise their operators – will be eligible for payments of up to £2.75 every time a cash withdrawal is made. This compares with a current subsidy of 30 pence, available through LINK’s financial inclusion programme.
There are strings attached. The £2.75 top-up payment will apply to ATMs that are free to use and more than one kilometre away from similar machines in areas that are considered badly served. Not all operators will receive the full £2.75. That will depend on the proximity of alternative ATMs.
Good For Consumers
The move should be good for consumers. Because the maximum £2.75 payment is relatively substantial, LINK believes it will prevent cash machine operators from transitioning from a “free-to-use” model to one that requires customers to pay a surcharge on every transaction. In other words, LINK is setting out not only to preserve cash machines but also to ensure that as many as possible are cost-free to customers.
Commenting, LINK Chief Executive John Howells, said:
“While many consumers are turning to alternative payment methods such as contactless cards, it is vital we continue to provide free access to cash to those who need it. These premiums will further safeguard ATMs in remote and less well-off areas.”
A Changing Market
As things stand, there are still a great many situations in which bank customers have no choice other than to pay with cash, even if they would rather use cards at shop points of sale. For instance, while a newsagent or pub on one side of a High Street might welcome card transactions with open arms, the barber or bakery across the road might well insist on cash payments. As Helen Prowse of payments company Square points out:
“Three million of the UK’s 5.7m SMEs still do not yet take card payments.”
But in the longer run, the ATM may have had its day. As Prowse sees it, with bank branches and ATMs continuing to close, consumers should be encouraging all business to join the card payment revolution. She cites an example of consumer activism that followed a spate of bank and cash machine closures in a North Wales town.
“When three banks closed in quick succession in Holywell, Square partnered with the town council to provide businesses with free card readers. The town now has 95% card acceptance, and since the initiative kicked off a year ago, 13 businesses have either redeveloped or opened,” she says.
As a card payment company, Square clearly has skin in the game, but it is probably true to say that over time – as cash machines shut down – small businesses will become ever more receptive to card payments.
Prowse believes that greater acceptance of card payments on the part of small business will ultimately boost local economies.
“Square’s own research shows that 81% of people would shop more locally if they knew shops would accept card payments,” she says.
Arguably technology and the changing preferences of consumers will ultimately make cash machines redundant. For the moment, however, they are an essential lifeline for many consumers and small businesses. By subsidising transactions, LINK hopes that free to use ATMs will be available in the majority of areas.