Can you imagine being charged £3 per every time you withdraw cash?
98% of us withdraw our money free of charge from cash machines, however changes to the way these free to use ATMs are funded could see many close and others having to charge withdrawal fees in order to stay open.
The LINK Network, which sets the funding formula for free to use ATMs (the interchange rate fee), plans to cut this funding by 20% over the next four years. The interchange rate fee is a 25p charge which is levied on card issuers and banks every time you use your card in an ATM machine. It is these 25p charges which pay for the upkeep and maintence of the ATM machine.
LINKs 20% reduction means that this fee will drop from 25p to 20p over four years. The first 5% or 1.25p cut will happen in just a few weeks on July 1st.
LINK claimed during the consultation over this cut that between 8% and 18% of free to use ATMs would go, and these closures would only happen in urban areas where there is an oversupply of free to use ATMs.
I however do not believe this is the case.
In the United States a similar change to how free to use ATMs were funded pushed up the average withdrawal fee to almost $5, and reduced the spread of ATMs in rural areas.
When LINK appeared before the Scottish Parliament’s Economy Jobs and Fair Work Committee they revealed that they now estimate the closures of free to use ATMs to be even greater than they initially expected. They now believe that up to 10% of Scotland’s free to use ATMs could close after the just the first 5% cut. This means that as many as 40% of Scotland’s free to use ATMs could close over the next four years, more than double LINK’s higher estimate of 18%.
Previously LINK has also offered assurances that no ATM would close if it was more than 1km way from another free to use ATM. This assurance was the bedrock of their financial inclusion policy which they said was designed to protect rural communities access to cash. When pressed on this recently, LINK chairman Mark Boleat said “I’m reluctant to make promises we can’t keep.”
ATM providers, the companies which run a business providing and running ATMs, are concerned that LINKs cuts to the funding formula means that their business will be put under threat and that existing free to use machines will have to close or charge a fee to remain viable.
Cardtronics, one of the UKs biggest ATM operators, is currently reviewing the economic viability of 1,500 ATMs, 600 of which are under urgent review. There will also be a hiatus on the installation of new ATMs.
There are no legal protections for free cash and nothing which secures the place of free to use ATMs on our high streets other than a business case based on the funding formula set by LINK or their ability to charge users to make a profit.
That is why I have introduced a bill in Westminster to ban ATM charges and introduce an enforceable access to banking standard to prevent communities from being cut off from financial infrastructure such as free to use ATMs.
We may be moving towards a cashless society, but we are not there yet. Research by the consumer body Which? has shown that in 9 in 10 people in Scotland see access to free cash as important to their lives, with rural areas being the most dependent.
The use of free to use ATMs is worth protecting. Studies by the FSB have shown that a loss of free to use ATMs can reduce footfall on the high street and decrease trade for businesses which rely on cash.
LINK argue that they are cutting the funding to ATMs because we are using cash less. While I accept we are moving towards a cashless society I believe the extent of LINKs cuts are an example of a forced change, against the broader needs and wishes of the public. That is why in my bill I want to shift the risk and the burden away from consumers.
If we are moving towards a cashless society, we must ensure that we arrive there at a pace set by the needs and desires of the public, not via fee-charging ATM machines that penalise consumers.
My bill would ban ATM charges and establish a right to free access to cash based on a full market review of the ATM network to establish demand for cash.
If we are serious about financial inclusion and economic development, particularly outside metropolitan areas, we should seek to protect the services people rely on.
Change should be driven by consumer use, not by financial institutions acting in their own interest. So long as there remains a demand for cash, access to that cash should be freely available no matter where you live.