Link rethinks business model as banks balk at ATM running costs

Link rethinks business model as banks balk at ATM running costs

The UK's Link ATM network is rethinking its business model as banks seek to reduce the costs incurred by providing free ATM withdrawals across the national network of 70,000 cash machines.

The total cost of the UK’s free to use ATM network is around £1bn, with Link member transactions coming in at around £750m. The nation's banks have begun to balk at the cost, which equates to a 25 pence surcharge every time a customers uses a non-branch machine at another bank.

The issue came to a head at a crisis meeting of Link members this morning, called to discuss the scheme's interchange and business model.

John Howells, chief executive of Link, says of the discussions: "Whilst commercial perspectives may vary, every Link member was clear at the meeting that ensuring the future of the Link Network and the cash access needs of UK consumers remains their number one priority."

Independent ATM companies, which provide 57% of Britain's cash machines, have warned that up to half of the nation's ATMs could disappear from the high street unless a new deal can be agreed.

At today's meeting, Link member banks agreed to convene a working group to explore alternative options to the current interchange arrangement, and will report back later this year.

In 2016, consumers made around 2.1 billion Link cash withdrawals amounting to £129 billion. The average withdrawal value is £69.

Says Howells: "Link will continue to work closely with its 39 members to keep regulators, government and consumer groups fully informed. The Link network continues to operate normally and it’s business as usual for consumers at all the UK's 70,000 ATMs.”

Comments: (5)

Gerard Hergenroeder
Gerard Hergenroeder - Payments Shark - Millersvile 26 January, 2017, 20:00Be the first to give this comment the thumbs up 0 likes

ATM transaction volumes in mature economies are decreasing as the demand for cash decreases. This creates a real problem from a productivity perspective. As volumes go down and costs remain constant transaction unit costs go up. Any ideas on how to reverse this trend?

Andy Agnew
Andy Agnew - Smart Traffic City - Edinburgh 27 January, 2017, 07:42Be the first to give this comment the thumbs up 0 likes

UK Branch closures over the next year or two will significantly increase the cost of cash handling in the remaining branches for the same reason.  Sooner or later a High St bank will stop accepting cash and this will cause a stampede to get out.  The government may step in and force some banks to keep offering a cash service and even subsidise it but becoming a cashless society appears inevitable. 

Ray Caradine
Ray Caradine - ACI - Amsterdam 27 January, 2017, 11:09Be the first to give this comment the thumbs up 0 likes

I think this "Banks being required to offer cash via Branches and ATMs" regulation is likely to come under increasing pressure in the next few years. Living in the Netherlands, I have seen personally the reduction in the need for cash as the roll-out of contactless terminals at Merchants has made it increasing easy to pay even small amounts via Card. I can easily see ATM services being pooled again between Banks in order to reduce operating costs. I suspect the Banks will not want to move to complete 3rd party ATM servicing, but will share IT solutions and keep their own Bank profile on the device.  I think the idea of a few years ago of the ATM being the great advestisting / cross-selling touchpoint from Banks to Clients is well dead.

Hitesh Thakkar
Hitesh Thakkar - SME - Fintech startups (APAC and Africa) - India 27 January, 2017, 15:04Be the first to give this comment the thumbs up 0 likes

Requirement for cash in matured market such as UK will find challenging in operating ATM network in coming years but, banks can look at ATM location as Location based marketing spot (Revenue/profit center) rather than Services outlet ( Cost center).

Banks in UK can take some learning pages from Indian ATM Outsourcing model.

1. More than 60% of bank ATMs are operated by third party ATM oursourcing companies with bank's responsbilities only to provide access to its ATM switch/network and cash ( Typically called Brown label ATMs).

Companies comply with all regulatory compliance, preserves bank's branding on outlet, screen and in-lobby visual merchandise at 50 to 60 % of the cost from bank owned ATM lobbies.

these companies operate ATMs on transactions fee basis and fees are far below interchange prevail.

2. With more than 5 active White label ATM operators in India ( Indepdent ATM Deployers - IAD) having started operating its ATM network, banks have closed/relocated its ATM to curtail bank's own ATM lobby overheads espcailly low foot fall traffic locations.

3. Some of the bank's such as DBS, has adopted Hybrid model where in Signage is of DBS but ATM is WLA/IAD operated for residual monthly outgo.

4. Location based marketing:

Across globe ATM locations are used for residual income generation using kiosks, Wi-Fi Hotspot, Mini Service Outlet/marketing spot which can generate residual income to cover upto 20% of cost overheads in some cases.

A Finextra member
A Finextra member 13 February, 2017, 09:02Be the first to give this comment the thumbs up 0 likes

Living in Oslo and working across Scandinavia I can count the number of times I have used an ATM the last year on 1 hand. An alternative to bank ATMs at least in  Norway/Sweden are the large grocery market retailers who offers free cash withdrawel at checkout.