I can see the benefit of enabling customers to retrieve and spend all of their money, especially for those customers that really depend on their last £10, including thse not so well off, children and students (obviously).
However, this does strike me as a potentially cynical move on behalf of the ATM provider. If there is a £2 charge to collect your last £5, then this charge amounts to around 40%
There are other ways that banks could provide a similar service to all of its customers. While better off people with package accounts have the luxury of a small free overdraft facility, there is no reason that users could not be given a nominal free £5
ATM facility allowing them to retrieve £10 from any ATM even when they only had £5 available.
This would help the banks in that their customers would benefit, they would bee seen as helping out the poorer customers and it would help attract the unbanked (around 1million people) to the banking system.
It would also mean that there was no need to put £5 and £10 notes into a machine which would reduce the amount it held by half and double the frequency for filling it up.
This is incredibly simple for banks to do. Instead of setting their customer overdraft limits to £0 by defauly, they only need to set it to £5. Job done, big publicity, minimum cost.