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MPs warn of danger to cash as ATM withdrawals plummet

MPs warn of danger to cash as ATM withdrawals plummet

MPs from across the House of Commons have called on the Chancellor to act now to protect the UK cash infrastructure from imminent collapse, as people shun ATMs due to the Covid-19 outbreak.

The letter, signed by 37 MPs, says the UK’s ATM network, which was already fragile due to cuts to the interchange fee, is now in imminent danger of collapse due to the Covid-19 emergency.

The Covid-19 pandemic is radically changing cash usage in the UK, with ATM withdrawals falling 60% during the lockdown and three quarters of Brits reporting that their use of paper money is down.

Politicians are calling on the Chancellor to urgently bring forward legislation to protect the UK's cash infrastructure by reviving free-to-use cash machines for local economies and communities, and reversing cuts to interchange fees.

The letter derides the Link ATM network's guarantee that communities facing cash shortages will have their fee-free cash machines replaced by a member bank.

"Whilst we welcome any measures which support access to cash, this will not address the root cause of why access to cash is declining," they write. "The measure is derisory, addressing only future ATM losses and not those that have already been lost or converted to pay to use. Link’s pledge will only protect ATMs for 12 months and, while Link states this will benefit 3,800 ATMs, it will in reality only cover a small proportion of these machines which it considers ‘critical'."

Campaigners and businesses have already written to the Chancellor urging him to reverse the cuts made to the fee paid by banks to ATM providers for every cash withdrawal, pointing out that banks have saved £200 million in the two years since interchange rates were changed.

"Link's new scheme, which will cost banks a mere £4 million, falls significantly short in filling this gap," says the MPs. "With banks refusing to properly fund the ATM network, customers are losing out as free to use cash machines become unviable meaning operators must start charging. This is happening as banks increasingly withdraw their own frontline services and close branches across the UK."

Cuts to the interchange fee have led to the growth of pay to use cash machines which have impacted less well-off consumers the most, paying £1 to £2 to withdraw £10 or £20, instead of their banks paying an interchange fee of circa 40 pence (up from 25 pence) for a ‘free’ transaction.

"As overall ATM transactions have halved this would still be much less than the banks would have expected to pay immediately before the pandemic," the letter states. "This would also ensure the long-term viability of the UK’s cash infrastructure."

Comments: (8)

Carlos Santaella
Carlos Santaella - FIDE PBC Europe - Madrid 26 May, 2020, 09:581 like 1 like

"You can take the horse to the river, but you can't force the horse to drink water from the river"

A Finextra member
A Finextra member 26 May, 2020, 10:32Be the first to give this comment the thumbs up 0 likes

The atm netwoek cost is to a large extent fixed while the revenue side is per trx. So if the transaction number goes down the atm owner suffers even if the interchage fee paid by the card issuer goes up unless the fee raise ecens out the drop of transaction numbers. Why should atm:s be free of use with under the table multilateral interchange fees? This set-up damages the business of the pay-for -use atm business and the competition office should stop this illegal multilateral interchange fee ring. This has been exactly the merchant argument against point of sale card payment interchange fees that merchants claim hikes the cost of goods sold. Court cases still pending against the card schemes. Now merchants seem to be in favour of the multilateral atm fees and even to increase them? When is the "free-atm scheme" taken to court? 

A Finextra member
A Finextra member 26 May, 2020, 10:441 like 1 like

The cold hard reality is that cash was already dying slowly - the COVID-19 pandemic has accelerated its demise in western economics.

The future is both cash-less and card-less - within the next twenty years (nearly) everything will migrate to digital delivery - enabling quicker and easier ways to empower payments, loyalty and general banking.

Trusted Execution Environments in mobile and edge devices will enable this evolutionary leap to ensure security is maintained from a consumer-device perspective.

Sandeep Todi
Sandeep Todi - Truly Financial - Toronto / Palo Alto 26 May, 2020, 16:301 like 1 like

It is ironical that the world is faced with the prospect of vanishing ATM machines because no one wants cash. And cash withdrawal may become more costly because the networks are losing money.


The underbanked and marginalized are the ones who are more dependent on cash compared to others and they would get impacted even more as less cash availability and less cash acceptance (in store) becomes a whirlpool that sucks them in.


Cash, it may seem finally, is not the King anymore.

A Finextra member
A Finextra member 26 May, 2020, 16:49Be the first to give this comment the thumbs up 0 likes

I bet the major card schemes are rubbing their hands in glee as it makes the average consumer even more dependent on their plastic which to must consumers is free, but in reality is paid for by merchants. Perhaps consumers should be made aware of the true costs of payments and allow merchants to pass on those direct costs (not exagerated costs like some airlines have charged) to the consumer via surcharges. Only then might they fully appreciate the benefits.

A Finextra member
A Finextra member 27 May, 2020, 11:22Be the first to give this comment the thumbs up 0 likes

But there's a huge cost of cash as well.

A Finextra member
A Finextra member 27 May, 2020, 11:471 like 1 like

@Finextra. You're right, here is a huge cost to cash ....and given the fixed costs associated with accepting it, as cash acceptance declines, the overal cost of cash will increase, resulting in fewer merchants wanting to accept it and ultimately increasing our ependency on the major card schemes who can, and are, increasing their other (non interchange) fees significantly. See this Finextra article : https://www.finextra.com/pressarticle/82525/retailers-and-wholesalers-call-for-urgent-amendment-of-card-fees-regulation

Consumers are mostly unaware of these fees and more transparency is required so that they can see what the true costs are and the dependency they have on electronic means of payment . In addition, what would happen if there's a massive power cut and little cash in circulation?

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 27 May, 2020, 12:11Be the first to give this comment the thumbs up 0 likes

"No Surcharge" rule has been repealed in many parts of the world. Probably in UK & EU, too. Merchants can levy Surcharge on Credit Card payments if he wants to. But Merchants tend to be greedy, they want to have their cake and eat it too. All along they'll complain about MDR / Merchant Fees. Then, when you tell them they can pass it on to Cardholders via Surcharge, they'll suddenly start worrying about loss of business and cost of handling cash. 

But Black Swan events have a way of changing consumer behavior and industry trends more strongly and certainly than wannabe disruptive competitors, so it is quite possible that cash usage will continue to decline rapidly going forward, just not because of digital payment alternatives.