On 1 July 2018, ATM interchange dropped from 25p to 20p. While this may not sound like much, it could lead to multiple ATMs or cash machines shutting down, but it also lead to a cashless UK? Patrick Brusnahan speaks to experts on the matter
The UK ATM operator has proposed a 5% reduction in the interchange rate from 1 July 2018, which would bring it down to 24p from 25p.
This is the first of four annual reductions of 5%. However, each reduction will be subject to further review.
This is part of Link’s overall plan to reduce interchange fees from 25p to 20p over the next four years.
Cash machines and their future
In an attempt to keep free-to-use cash machines in smaller, rural areas, there will be no change for free ATMs one kilometre or more from the next free ATM.
Another slight relief is that an extra subsidy of 10p per withdrawal, currently available to 300 ATMs, will be tripled to 30p. This will be for some of the cash machines in areas with little access to cash.
The ATM Industry Association (ATMIA) believes that this move could see around 30,000 ATMs disappear city centres.
Stuart Rye, director of business development for financial services, Fujitsu UK
“Even as we move towards a cashless society, ATMs still play an important role in the financial life of Brits across the country, and reduced access might have unpredictable consequences for a number of industries besides the financial services – such as retail and hospitality – as well as for consumers.
“There is clearly a mandate for a more homogenous spread of ATMs across all regions, but if closures need to happen, they should be done in a strategic manner that still takes into account ATM supply and consumer demand.
Other countries, such as Sweden, have developed cashless economies that work well for everyone, but we would need a more sophisticated ecosystem to do this in a cost effective and efficient way – ATMs are still vital.
“Maintaining an ATM estate can be challenging, with cash replenishment and machine maintenance involving high recurring costs. However, there are other ways to lower these costs; investing in technology can help create power and energy savings and better install and maintenance processes. At Fujitsu, we’re looking at how we can use AI and advanced computing techniques to optimise cash management, a development which could reduce the cost of cash handling and create a more efficient ATM network.
Ultimately, this is a complex issue involving numerous important stakeholders – banks, retailers, consumers, and ATM businesses. It’s tough to get it right, and requires a considered approach which takes into account those parties needs now and the trends that will determine their needs in the future.
Oscar Nieboer, CMO, Paysafe,
In an always-on connected world, digital and frictionless payment methods are inevitably playing a more significant role in consumers’ lives, but cash continues to offer familiarity and unrivalled security.
ATM closures represent one aspect of consumers’ changing relationship with cash, but the story is more complex and in part we’re seeing this being offset by the migration of cash-based solutions to the digital world.
This migration is important to consumers. Our Lost in Transaction research found 63% of consumers feel uncomfortable storing their financial information online, worries which digital cash-based solutions are easing.
For example, pre-paid cards and digital cash services allow consumers to convert cash into digital currency to pay for goods and services, online and in-store, without having to provide bank or credit card details to merchants.
Digital cash-based solutions strike a crucial balance between security and seamlessness. These methods champion the millions of consumers who prefer to use cash, and enables them to spend that cash safely online.
Dean Wallace, Practice Lead, Real-Time & Digital Payments, ACI Worldwide
The UK is moving to Digital Payments for purchases from merchants and for paying each other, gradually replacing cash.
This means that over time, ATM operators will receive less income for this channel, which will result in less innovation at the ATM causing digital methods to look more attractive. The problem is that the move to digital is not completely omnipresent across society, and some user groups will be impacted by the obvious reduction in ATMs that will occur.
That said, access to cash will still be available over the counter at both the Post Office, and convenience stores, such as the Co-Op. Cold hard cash is accepted almost everywhere, and as we saw with the recent chaos brought on by Visa and TSB outages, it comes in handy because cash can’t “crash”.
Consumers simply demand choice, and financial institutions need a flexible and robust capability to ensure they can meet the varying demands of consumers.