You may have seen that towards the end of January there was a lot of news coverage around changes with the way ATMs are paid for. Link, the network which connects over 70,000 free-to-use ATMs in the UK, is planning to reduce the money it pays ATM owners, from 25p per withdrawal now, to 20p in 2022.
As a result, there are fears this will lead to half of all ATMs closing in the UK. According to consumer group, Which?, there are already more than 200 communities with poor ATM provision. 123 postcodes appear to currently have no ATM at all!
By some, this has been named the ‘ATM desert’, vast areas with no way of accessing cash. With banks branches increasingly leaving these areas as well, access to financial services is under threat. There is a fear that smaller towns and villages may soon be without any effective way of withdrawing money.
Strong demand, no supply
We know that consumers still need and want ATMs. Research last year showed that even younger audiences still use ATMs on a regular basis – in a survey from last year, a fifth of respondents under 25 said they had used a bank branch within the last week.
There’s an appetite for them to expand the services that they offer. Our research from last year said the most requested features were:
• Cash withdrawal in multiple denominations – 52%
• Bill payments – 34%
• Currency exchange – 22%
So, despite demand it looks like some areas will be left without appropriate access. We see this as a catalyst for the growth of two major trends. Consumers may be left to rely on cashback from supermarkets and retailers. This relies on having big enough shops within walking distance to access service, but also places the onus on the consumer to make a purchase when the UK is used to free-to-use ATMs.
Crisis of ownership
ATMs and branches present a significant cost of ownership for banks, and as fewer people use them the cost per user is only set to increase. In many countries, the cost of ownership has fallen on third parties not the banks themselves, in the UK 50% of ATMs are not owned by banks. Banks are increasingly seeing off-site ATMs as a commercial service with no real competitive advantage, whereas banks within the branch can be used for building relationships with consumers.
Increasingly, banks are looking to pool and collaborate with each other to reduce this cost of ownership. Banks who are part of this will have access to an increased network, lower costs and more opportunities to commercialise the offering with increased services available through ATMs. Increasing the number of services available through ATMs are paramount to keeping a free network thriving in the UK. It could also see more high street shops and entertainment venues offering ATMs, that are privately owned by the establishment thereby increasing access in rural locations. For example, smaller cinemas using ATMS as a draw for customers and an additional revenue source.
Another alternative is the white label financial hub. This would result in new branches that serve a range of banking providers. Imagine a branch that, when the customer walks in, doesn’t have any single identity, but when the customer uses their card in an ATM they are served as though they were in their usual bank branch.