UK Cash Usage Falls, ATM Fee Cuts Partially Canceled

ATM network operator LINK has partially canceled its plans to cut the fees that banks pay to British cash machines operators. Finextra reported that, earlier this year, LINK had announced a phased 20-percent reduction in interchange rates over four years. The first 5 percent cut took effect on July 1, and the second is scheduled to take place on January 1, 2019.

However, according to Financial Times, LINK reconsidered its position — partly due to political backlash, but mostly because of data showing that both ATM usage and cash transactions have fallen sharply in recent months. As a result, it is canceling a planned cut for January 2020 and reviewing another scheduled for January 2021. Cash machine operators are pleased with the decision after warning that the reductions would make thousands of their more than 54,000 free-to-use cash points uneconomical, possibly leading to closures and the creation of “ATM deserts” in rural areas.

“We had always argued that we could live with a more sensible level of interchange fees. I would say that, after today’s changes, they have got it about right,” said Peter McNamara, chief executive of NoteMachine, which operates 11,000 ATMs.

The Payment Systems Regulator agreed, saying, “We said that it was really important the LINK board carefully reviews its decisions on interchange fees to reflect changing market conditions and demand for cash, and change course if needed.”

LINK and banks had pointed out that more than 80 percent of free-to-use ATMs are within 300 meters of each other, making the system inefficient. In response, politicians and consumer groups argued that rural communities and small businesses could find it harder to withdraw or deposit cash, especially since high-street banks are closing hundreds of branches every year.

“Many consumers are turning to alternatives to cash more quickly than expected, and usage of ATMs is now dropping at 6 percent per annum,” said John Howells, chief executive of LINK. “LINK will, therefore, adjust interchange to maintain free-to-use coverage in line with our commitments to the public and to our participants.”