Dominic Hirsch. Photo: Revelation
The number of ATMs in the UK fell by more than 13,000 (19%) over the three-year period from late 2017 to late 2020, and is expected to decline further this year. With ATMs, bank branches and post offices closed or removed, the media is flooded with reports of “cash deserts” – geographical areas where the public have to travel long distances to get money.
But how did this situation come about, and are there any relevant lessons in Brazil?
Three-quarters of ATMs in the UK are free to use, and for these machines, the ATM owner receives a fee called the transfer fee paid by the card issuer for each withdrawal. In mid-2018, and again in early 2019, the UK exchange rate was reduced, the first and second of the planned 4% to 5% reductions in exchange rates. Time could not have been worse because of the combination of the growth of electronic payments and the decline in the use of money, although these transaction fee reductions may seem small, the profit margin on UK transaction fees is low and the number of transaction transactions and the decline in revenue per transaction are no longer operational for many ATMs. Some ATM owners have tried to convert their free ATMs into payments, usually charging GPB2 (14 RAIS) to withdraw money directly from consumers, but this has further reduced the number of withdrawals at these machines and most ATMs. Which means they are not yet sustainable.
Link, which operates the UK’s national ATM network, canceled the planned third and fourth transfer tariffs, which means that the current cash transfer in the UK is 0 GB 23.2 (1.7 Rice) branch ATM and GBP 0.26 (1.9 reais) per external machine. Based on its merits, LINK has introduced a number of initiatives to help resolve the situation, including awards for fixed transfer fees at selected locations to enhance funding and the ability of local communities to apply for ATMs.
Even with these changes, the UK government is increasingly concerned about the social implications of reducing access to money. It has introduced legislation this year to help solve the problem, allowing customers to withdraw money from retailers without making a purchase, and is currently consulting on plans to establish minimum access to monetary rules applicable to major financial institutions across the country. .
An important lesson from this recent history of ATMs is that ATM deployment is highly sensitive to payment levels, and small fee changes can have unintended consequences if ATM owners can no longer cover their costs. This situation is further exacerbated in the growing environment of contactless mobile payments and payment cards.
With four free withdrawals per month, the Brazilian and UK ATM markets are like free cash withdrawals for customers. Banks offer to ensure that these fees are as low as possible as they are paid by the card issuer to the ATM owner. To some extent it is efficient, there is a risk of over-supply if the fee is set too high, but the transfer fee is relatively low in both Brazil and the UK by international comparisons. What the UK experience shows us is that risk is high in the other direction, which can lead to the creation of unplanned ‘hard cash deserts’.
* Dominic Hirsch, Managing Director of RBR
