Select Committee on Treasury Written Evidence

Memoranda submitted by Which?


  Which? campaigns for all consumers. With around 700,000 members in the UK, we are the largest consumer organisation in Europe. Entirely independent of government and industry, we are funded through sales of our consumer magazines and books.


  1.1  Developments in the last year suggest that the overall make up of the Automated Teller Machine (ATM) population in the UK is on the verge of changing. The last three years has seen a considerable growth of machines that charge a fee for the withdrawal of money, a process known as "surcharging".

  1.2  In 2003, consumers withdrew over £140 billion in about 2.4 billion transactions from ATMs, a steady increase from £80 billion in about 1.5 billion transactions in 1996. [37]One of the principal reasons for this is the current account is the primary vehicle through which consumers receive and manage their money. Most salaries/wages and virtually all benefits and pensions are deposited directly into current accounts. These cash withdrawals are expected to increase by 25% over the next nine years to 2012, albeit at a slightly slower rate than before. [38]

  1.3  At the moment, all bank and building society current account holders in the UK can access their money without a surcharge at any one of the 34,000 free ATMs (73% of the entire ATM network). [39]Over half of these (59%) are branch ATMs, while the rest are non-branch (also called "remote") machines. [40]All the bank and building society branch ATMs and the vast majority of their non-branch estates allow the holder of any bank card to use another bank's cash machine without incurring a surcharge. [41]

  1.4  However this situation is changing as a result of an increase in machines that charge a fee per transaction. These surcharging ATMs now represent 40% of the total ATM population, most of which are installed by a series of firms called Independent ATM Deployers (IADs). [42]They started appearing in 1999 as "convenience cash machines" in shops and nightclubs, but now number about 18,500 in numerous locations including railway stations, motorway services and shopping arcades. These ATMs charge a fee of £1.00-£1.75 per transaction (more in some cases), fixed regardless of the amount withdrawn. Although surcharging ATMs constituted an utilisation rate of only about 3% of all ATM transactions, consumers still paid £60 million per year in ATM charges in 2003. [43]A single consumer, forced to use a surcharging ATM costing £1.50 to withdraw £20 four times a week would be paying £312 per year in ATM charges alone.

  1.5  There is growth in both free and surcharging ATMs, though the latter are growing more rapidly. Between 2000 and 2004, surcharging ATMs deployed by IADs grew at an average rate of 3,670 new machines, or nearly 10% of the entire UK ATM population, per year. In 2003, surcharging ATMs increased by about 51.8% compared to only 3% increase in free ATMs. [44]According to Nationwide, the last 6 months to Sep 2004 alone saw an increase in charging ATMs of about 40%.[45]


  2.1  Which? policy position regarding ATMs is as follows:

  2.1.1  All consumers should be able to, with reasonable convenience, access and manage their own money free of surcharge. By this we mean:

    —  Should be able to: consumers should have the choice of accessing their money without surcharge. We are not calling for all ATM services in the UK be free. We believe that surcharging "convenience ATMs" do have a place, provided they do not encroach on a consumer's access to free ATMs.

    —  With reasonable convenience: consumers should not have to go to unreasonable lengths such as travel long distances. This does not preclude giving consumers the choice of paying for ATM services that are "more" convenient such as in stores and other points of sale.

    —  Access and manage their money: means access their cash as well as manage their funds such as transfer money, check balances, demand statements, etc.

    —  Free of a surcharge: meaning free of direct surcharges to the cardholder for the ATM transaction.

  2.2  All ATMs (both free and charging) should bear messaging that clearly indicates whether or not the machine is surcharging, and if so, the amount of the surcharge. This messaging should take the form of both a conspicuous signpost physically on the machine and an unambiguous and un-missable early-stage on-screen message.

  2.3  As for the fee on surcharging ATMs, we believe:

    —  the current fixed surcharges of £1.50-£1.75 (in some cases as much as £5), is excessive and unfair.

    —  The surcharge be calculated on a floating rather than fixed basis so that the fee is proportional to the amount withdrawn.

    —  The surcharge subject to a limit. A surcharge cap should be set at about 7% to a maximum of £1.

  2.4  On the subject of financial exclusion and location, our analysis suggests that free ATMs in lower volume areas are highly at risk of conversion to charging status. Therefore we believe that:

    —  Banks and building societies should establish shared branch services. We have long campaigned for this with the Campaign for Community Banking Services (CCBS).

    —  In the certain communities where even shared branches are clearly not justifiable, the banks and building societies must commit to ensuring that these communities are served by free non-branch ATMs.

    —  There should be exemptions for those individuals who rely on state support to meet basic living costs. The technology should be developed so that ATM cards belonging to current accounts receiving (for example) income support, disability allowance, or pensions are earmarked to be exempt from ATM surcharges.


  3.1  Which? has long been involved in ensuring that consumers can have free and convenient access to their own money. In the late 1990s, we took a strong view against banks levying excessive charges on consumers using an ATM operated by a bank other than their own. We took the view that the proposed £1 charge was excessive because we believed it was triple the true cost of providing this service. We supported an Early Day Motion in February 2000 which largely led to the introduction of free bank and building society access to ATMs.

  3.2  When charging ATMs started reappearing in 2001, we wrote to LINK and the Banking Code requesting that they ensure that all ATMs (both free and surcharging) are suitably labelled as such. We reported in Which? in November 2001 and again in October 2003 that some ATM deployers, though disturbingly not all, were doing this.


  4.1  Free ATMs still constitute the majority of the transactions. In 2003, 97% of all ATM transactions were from free machines. The average number of withdrawals per day at free ATMs was 196 compared to 15 at charging machines.

  4.3  However we think this gap will narrow as surcharging ATMs become more ubiquitous. The CEO of Cardpoint, the company that recently bought over 80% of HBOS's non-branch network, agrees: "given this growth of new convenience ATMs, the large difference in utilisation rates between cash machines owned by banks and building societies and those operated by IADs will narrow".[46]

  4.2  Our general view is that surcharging ATMs are an acceptable way of delivering of cash to consumers in certain circumstances, on the condition that they:

    —  do not encroach on the free ATM estate, endangering consumers' free access to their money;

    —  the surcharge is fair and reasonable; and

    —  are suitably labelled.

  4.2  However, events in the last year suggest that these three conditions are not being met, and if recent developments are duplicated, a situation whereby more consumers are forced to use surcharging ATMs for their general cash access is not inconceivable.

  4.3  There are essentially three types of ATMs in UK market:

    —  bank or building society (BBS) branch ATMs;

    —  convenience ATMs; and

    —  public space ATMs.

  4.4.  Each category has particular characteristics, and need to be analysed separately. This is made difficult because much of the industry statistics fall into simply two categories: branch and non-branch. Nevertheless, for the purposes of this analysis, it is necessary to use three categories.


  5.1  These are machines deployed at Bank and Building Society (BBS) branches, either within the premises in the lobby or customer area, or mounted on the building in a "hole in the wall". The vast majority of the 19,349 branch machines (99.9%) in 2004 are owned by the BBS themselves and are free to all cardholders of UK accounts. [47]Branches account for 41.7% of all ATMs, having been overtaken for the first time in 2002 by the rapidly growing non-branch network.

  5.2  Two issues are relevant to the continued availability of free branch ATMs: continued branch availability; ATM availability in branches.

5.3  Availability of Branches

  5.3.1  Although free ATMs in branches seems assured, it is possible that the overall branch availability may decline. However this is more an area to do with financial exclusion and location, to be discussed in detail later in this evidence.

5.4  ATM Availability in Branches

  5.4.1  We think that, although the number of free ATMs available in each branch is likely to decline, the overall availability of free ATMs at branches does not seem under threat.

  5.4.2  Although the overall number of branch ATMs has increased by about 1.1% since 2001, the proportion of the entire BBS ATM estate deployed in branches has actually dropped very slightly from 63.7% in 2001 to 60.4% in 2003. [48]This would suggest that banks and building societies are undergoing an overall trend of moving their ATMs to remote sites.

  5.4.3  Our analysis suggests that one reason for this reduction of branch estates could be due to banks and building societies minimising operating costs derived from the LINK Interchange Fee (LIF). The LIF, about 30p per transaction, can constitute an expense depending on how the machine is used.

    —  If a BBS cardholder uses his/her own BBS free ATM (this is called an "On-Us Transaction"), no LIF is exchanged and the cost of the transaction is borne by the cardholder's institution.

    —  If the cardholder uses a free ATM used by another deployer (a "Not-on-Us Transaction"), the LIF is payable by cardholder's BBS to the ATM deployer.

    —  For a surcharging ATM, the cardholder pays the LIF, but also a portion to the ATM host (up to about 85p[49]) plus an extra cost amounting to £1.50.

  5.4.4  The last several years has seen a marked decrease in cardholders using their cards in their own ATMs, with the volume of "Not-on-Us" transactions exceeded "On-Us" transactions for the first time in 2002. [50]This could mean that the exchange of LIF is becoming more of a potential issue for the banks and building societies. It could be within an institution's interests to become a net receiver rather than net payer of LIF charges.

  5.5.5  Although there are obviously a host of factors in an institution's ATM citing policy, such as branding and marketing, we do think that LIF expense potential is a significant influence. Banks with most of their ATMs cited inside their branches rather than through-the-wall are more likely to be net payers of LIF's because customer "footfall" in a branch will be higher than visitor "footfall". This could be why there are nearly three times as many through- the-wall machines as there were those deployed in both customer area and lobbies in 2002. [51]Proportions of the indoor machines are also declining further year-on-year. [52]The years 2001-02 saw a noticeable decline in ATMs deployed in customer areas (14% drop) and lobbies (12% drop).

  5.5.6  We think that financial institutions could address this net-receiver/net-payer balance more effectively by citing more of their free ATMs in high volume public spaces such as railway stations where visitor footfall is proportionally much greater. In the last few years, some financial institutions have invested heavily in non-branch ATMs, and reduced (or reduced growth) of its branch estates (see chart in Appendix A). Notably, in the period 2001-03:

    —  Lloyds TSB has increased its relatively small non-branch estate by 19.5%, and reduced its very large branch-deployed estate by 6%.

    —  RBS-Natwest increased its non-branch estate by 23.7%, and increased its branch estate by only 2%.

    —  Alliance & Leicester has a very large remote estate of surcharging ATMs, and increased this by 57.5%, and only increased its very small branch estate by only 0.5% in the period.

    —  Nationwide have increased its demand estate by 24%.

    —  Co-Operative Bank also has a very large remote estate, much of which is surcharging. Most of its ATMs (82.7% in 2003) are convenience machines in its Co-op Store chain, and increased this by 126% in the period.

  5.5.7  However it should also be noted that other banks have reduced their remote estates. Notable cases are Abbey and HBOS, and this will be explained in the section on Public Space ATMs below. Nevertheless, the overall trend is that remote ATM share has increased slightly compared to a slight decrease in the branch estate. Most of the 3% growth in free ATMs in 2003 were in the remote estate.

  5.5.8  We have not observed any incidence at this time of branches removing all their free ATMs, or replacing them with surcharging ones. Only very small building societies that cannot afford the operating costs of their own ATM have deployed IAD machines, however this amounts to an infinitesimal share (0.1% of the entire branch network). Free ATMs mounted on branch exteriors are viable from an LIF perspective, are relatively cheap to operate compared to a remote machine, and significantly cheaper than face-to-face counter service. We believe it unlikely at this time that BBS's will start removing free ATMs from their branches. We think that, although the overall number of branch-mounted ATMs will continue to decline, the free branch ATM network is assured as long as the branches themselves continue to exist, and there remains a sizeable non-branch free ATM network.

  5.5.9  However it is possible to envisage a scenario whereby bank and building society branches eventually became surrounded by a non-branch network virtually controlled by IADs. This non-branch network would be levying surcharges well above marginal cost (as they now do) and rising. In such a scenario, it would simply be longer commercially viable to maintain free machines (compensated by a meagre LINK Interchange Fee) anywhere.


  6.1  These are machines found in corner shops, supermarkets, pubs and night clubs. They are not designed for general banking usage but rather as a way to access cash without the inconvenience of having to leave the premises deploying the ATM. In 2003, 19,658 ATMs or 35% of the entire ATM network were deployed in convenience locations. [53]Over 77% of these convenience machines are installed by Independent ATM Deployers (IADs), and the vast majority of which (about 95% at the end of 2003) are surcharging. A small minority of Alliance & Leicester and Co-operative Bank convenience machines also charge a fee.

  6.2  We have no major concern with the principal of surcharging convenience ATMs, provided the surcharge is fair and proportionate (see our section below on charges); they are clearly labeled (see our section on transparency below), and they do not encroach on the free ATM network. However it is not inconceivable that the latter may indeed happen: that more convenience ATMs may switch to surcharging. This may be brought about by a combination of an aggressive growth of IAD share combined with banks and building societies reducing their remote networks.

6.3.   AD Growth

  6.3.1  We think it is likely that the charging ATMs in convenience stores will continue to grow as much as the market will bear.

  6.3.2  The last three years has seen a rapid growth of surcharging ATMs, and 2003 was the first year that surcharging ATMs overtook free ATMs in the non-branch network. Of all the non-branch ATMs in the UK (both convenience and what we label `public space'), 14,436 or 53.3% are now surcharging. While the entire free machine estate in the UK has increased at a steady rate of about 3-4% per year since 2000[54], the surcharging ATMs have increased at a faster rate (72% year-on-year in 2001, declining slightly to 51.8% year-on-year in 2003). Between 2000 and 2004, surcharging ATMs deployed by IADs grew at an average rate of 3,670 new machines, or nearly 10% of the entire UK ATM population, per year. Although this rapid rise has been from a base of nil in 2000, the surcharging ATMs are catching up with the free population. The vast majority of the surcharging non-branch ATMs are deployed by IADs.

  6.3.4  This rapidly growing market for surcharging ATMs has allowed rapid entry of an IAD industry over the past four years:

    —  It is concentrated. Of the 9 significant IADs, four own 68% of the market:

    —  Hanco at 25% was recently been acquired by RBS;

    —  Moneybox at 15%;

    —  Cardpoint (which bought a quarter of HBOS's machines) at 14%; and

    —  TRM at 13%.

    —  The industry is also quite lucrative. Cardpoint announced this week better than expected pre-tax profits rose from £50,000 last year to over £1.8 million this year. This impressive increase is likely due to a switch in business development stages from capital expenditure to profit maximisation. Its chief executive promised its shareholders that "looks forward to delivering significant growth in 2005".[55]

  6.3.5  Given this development and concentration, the IADs are making notable progress in accessing the convenience market. Small businesses are given clear incentives to install such machines, including impressive return figures, relatively low risk, and even add-on perquisites such as free telephone lines allowing them to open up new service lines. [56]The reason for the development of new markets not previously served by ATMs is obvious. This growth is likely to continue, but will eventually reach a saturation point when over-supply would begin to affect marginal revenue.

  6.3.6  To combat this saturation point fear, we think that IADs will seek to extend this growth into the free ATM network installed in convenience locations by the banks and building societies.

6.4  Bank and Building Society (BBS) Reduction

  6.4.1  While the convenience market seems highly attractive to the IADs, the banks and building societies would have every reason to reduce their remote services in these locations. In 2003, convenience machines accounted for 67% of the BBS Non-Branch network, and 26.5% of the entire BBS network. [57]

  6.4.2  It is quite possible that BBS will elect to reduce this network in the future. Non-branch ATMs are more costly than branches, mainly because operating costs of supplying and servicing a remote location would be much higher. Newer machines, particularly those installed by the IADs, allow the host retailer to resupply the machine with cash from his own float (another attractive characteristic for small businesses), thus mitigating a significant element of operating cost. However the older BBS machines are not likely to be designed for this. Nevertheless, rents are relatively low compared to some public spaces, so it is possible that the larger institutions may elect to keep this estate intact.

  6.4.3  Convenience locations are also characterised by their relatively low footfall compared to other non-branch locations. Therefore we think from an LIF balancing perspective, own customer exposure is likely to be relatively modest, so LIF expenses would be proportionally lower. Nevertheless, some higher volume locations would remain lucrative.

  6.5  Therefore we think it is likely that some of the existing free convenience ATMs will be removed or switched from free to surcharging.


  7.1  These are ATMs in airports, railway and underground stations, motorway services, post offices, and shopping centres.

  We have developed this third category distinct from convenience ATMs because it is one where bank branches are not normally within easy access, and they are in a generally shared location where more than one business is operating. In 2003, 7,436 machines (over a quarter of the entire non-branch network) were cited in "public spaces".[58]

  7.2  Presently these public spaces are served by a mixture of branded bank or building society free ATMs. At the end of 2003, there were slightly more BBS ATMs than IADs (56 to 44% split), and public space ATMs constitute over a third of the BBS Non-Branch share. However we think this make up will change significantly in the next few years. We think that:

    —  although free ATMs in busy central public spaces seem fairly assured at this time; however

    —  it is possible that free ATMs in quieter lower volume places are under threat.

  7.3  As described above, non-branch ATMs must be much more expensive than branch ATMs owing to their remoteness. One of the major costs is re-supply, and unlike convenience locations, there is no one host retailer to take the re-supply role. Another considerable cost in many public spaces is space rental, which is probably why the much busier locations such as central London mainline stations are almost exclusively dominated by the larger banks and building societies. On the plus side, footfall is considerably higher than both branches and convenience locations, so the LIF balance question must be considerable. [59]


(as at March 2004)
Corner shops, newsagents, etc 30631.2%
Other retail525.3%
Sports centres, gambling, etc7 0.7%
Bars, pubs, clubs29 3.0%
Post offices80.8%
Motorway services386 39.3%
Railway stations, etc26 2.6%
Garages, etc555.6%

Source: APACS

  7.4  However this LIF revenue would surely be much lower in lower volume public spaces, such as smaller motorway service centres and post offices. So we think it is not inconceivable that financial institutions could determine that an outright sale of their ATMs in quieter public spaces is more beneficial. Smaller banks and building societies have already begun to do this.

  7.5  In May 2004, HBOS was the first major financial institution to sell part of its share to an IAD. It sold 816 non-branch ATMs to Cardpoint plc. This amounts to 83.1% of its entire non-branch network. The sale also follows a period of consistent decline: between 2001 and 2003, it shed nearly a third of its remote network prior to the sale. [60]Its non-branch network now accounts for only 6.1% of its entire ATM estate. Not surprisingly most of the ATMs in the deal were in public spaces, according to information compared from both the Cardpoint literature and APACS data on HBOS's pre-sale estate. Over half were in what we label as "public spaces", including post offices, motorway services, railway stations, garages, workplaces, and shopping centres.

  7.6  It is also likely that a large proportion, of not eventually all, of these sold machines will be converted from free to surcharging. This is likely for two reasons. First the IAD will try to maximise its surcharging estate. Cardpoint announced that over 250 machines that were previously non-charging will be switched to charging status. The company stated that "the process to bring retailers to the charging model continues and you will see this number increase in the year ending 30 September 2005." [61]

  7.7  Second, it is in HBOS's interests for the machines to be surcharging. If it sells machines that are unlikely to be converted to charging, then when its own cardholders using them will result in a LINK Interchange Fee expense on HBOS. This is not such a factor for smaller building societies, but it is for the fifth largest retail bank in the UK with an estimated 11% current account market share. [62]Over time this can amount to a false economy for the seller, eclipsing any gain on the sale. So it's in the seller's interest to ensure that the machines sold are most likely to be converted.

  7.8  This puts quieter lower volume locations, particularly those with limited free machine access elsewhere particularly at risk of transfer. This can be illustrated with a very simple example. A large bank is considering selling one of two ATMs. One is located in a busy mainline station where there are two other free ATMs and considerable footfall; the other in a quieter service station outside a small village with only surcharging convenience ATMs within a 2km radius. Their perspectives, other things being equal, could be as follows:

    —  Prospective IAD: the quieter service station is more attractive because competition against free ATMs for the high potential footfall is limited. The only competition comes from the other surcharging ATMs. In the case of the station, footfall is greater, but there is competition with free ATMs.

    —  Selling Bank: the quieter service station is more attractive to sell. Although rent will be cheaper, the smaller location will have more limited exposure to its own customers, so LIF expense is limited. The mainline station will be more expensive, but it is more likely to attract visitor footfall.

  7.9  If analysed in isolation, the HBOS-Cardpoint deal constitutes a tiny proportion of the entire ATM population. However it is not inconceivable that other financial institutions may follow the example. Analysis of the remote ATM estates for fourteen banks and building societies (Appendix A) reveals that Abbey, HSBC, and Barclays also seem to be undergoing a programme to reduce their non-branch networks. The smaller banks and building societies would quickly follow suit. It is possible to generate a scenario of the likely free/surcharging ATM share in the light of such developments:

    —  Cardpoint purchase of 816 HBOS non-branch machines, all of which eventually become surcharging.

    —  If each of those three financial institutions sells 80% of its non-branch network, the IAD share will increase by another 1,400 machines.

    —  Smaller banks selling non-branch networks, resulting in another 200 machines

    —  However other banks increase their non-branch network by about 2.5% as in 2003.

    —  IAD convenience ATM growth drops slightly from 52% in 2003 to 45%, resulting in 6,500 new machines.

    —  The total surcharging IAD population will rise to over 55,000 machines.

  7.10  Under this scenario, surcharging IADs would then constitute over 64% of the entire ATM estate in the UK, and over 83% of the non-branch network. As more people are forced to use these machines, the "utilisation gap" between the volume of surcharged and free transactions would narrow considerably.


  8.1  We think the current fixed surcharges of £1.50-£1.75 (in some cases as much as £5), costing consumers as much as 17% of the money withdrawn, is excessive and unfair. It is wholly disproportionate to the realistic cost of running even a remote convenience ATM. This only suggests that firms in this market are charging what they wish, in many cases because consumers have little choice in an increasingly captive market. If this continues unchecked, the industry would be at liberty to further inflate the surcharge further as free ATMs become less accessible.

  8.2  For surcharging ATMs, we would like to see:

    —  The surcharge be calculated on a floating rather than fixed basis so that the fee is proportional to the amount withdrawn.

    —  The surcharge subject to a cap. We think the surcharge cap of about 7% to a maximum of £1 is reasonable and should be set.


  9.1  Which? has long taken the view that all ATMs should bear clear messaging. Given the aggressive growth in surcharging machines in the last few years, we believe that transparency is more important than ever.

  9.2  The Independent ATM Deployer (IAD) industry has claimed that the ATM growth is driven by a clear demand from consumers who are prepared to pay the charge. In order for this to be truly the case, consumers would have to be aware that

    —  the machine charges a fee, before they committed to investing time in the machine (queuing for example);

    —  the fee charged can be £1.50 to £1.75 (higher in some cases), amounting to upwards of 17% of the transaction if they are withdrawing £10; and

    —  that they have the option of using a BBS machine that levies no surcharge, but they have nevertheless chose to use a surcharging machine.

  9.3  We would argue that consumers are not sufficiently aware of these three bits of information. In March 2004, we conducted an omnibus survey of 2000 consumers, asking them their awareness of charging and non-charging machines. All adults with a debit card or cash point card were asked—from a list—when they thought they would be charged for taking money from cash machines. The correct response is that only machines in convenience/local stores will charge:

    —  One third (33%) expected to be charged for taking money out at a cash machine in a local store.

    —   Two thirds (67%) did not know that they would be charged in this case.

    —  Only 23% correctly said that they would only be charged in this case.

    —  Consequently, 77% of people either did not know when they would be charged for taking money from a cash point or were mistaken in their understanding of when they would be charged.

    —  Indeed, 47% thought that a bank would charge them when, in reality, none of the banks currently charge for use of their cash machines.

    —  A fifth (18%) did not think they would be charged on any of the given occasions.

  9.4.  This indicates a clear lack of awareness of the three points raised above. We think that if consumers were better aware of these points, it is possible that the market would be better able to respond to and bear the rise of surcharging ATMs.

  9.5.  Labelling has already been attempted by the industry. The LINK Membership set down some guidelines effective April 2004 on how they are to be labelled. These must be either:

    —  A label or sticker on the machine indicating that a charge is payable. This charge must not be obstructed; or

    —  An on-screen message in the "welcome screen" of the ATM.

  9.7.  While charging ATMs are often easily recognised by their bright colours, many consumers are still unaware that they need to look out for the stickers or on-screen messages. Often consumers don't know the machines charge, especially when most of the ATMs on the market do not charge. Some operators appear to be either disregarding or flouting the LINK guidelines by displaying warnings in a way that makes it difficult for them to spot, or delaying the electronic warning until later in the transaction, so the consumer decides to proceed and pay the charge anyway.

  9.8.  On the issue of transparency, we would like to see all ATMs, both free and surcharging, carrying both a conspicuous sign indicating that the machine is free or surcharging and an unambiguous and un-missable early-stage on-screen message:

    —  The sign should be so that the consumer could see from a distance whether a charge is applicable, which could be useful in the event of a queue for example. It should state unambiguously whether the machine is free or surcharging, specifically what that charge is, and to which card users this charge would apply. Some banks and building societies have done this, we would like to see all follow suit.

    —  The on-screen message should appear directly after the consumer's card has been inserted warning the user that there will be an £x charge for the withdrawal and asking them whether they wish to continue.

    —  We also agree with Nationwide's proposal that ATMs should bear a 30-day advance warning prior to a change in status from free to charging, and prior to any increase in the charge.


  10.1.  Another principle area of concern is the impact of surcharging ATMs on consumers in deprived areas.

  10.2.  Research by the Campaign for Community Banking Services (CCBS) found that 6,000 BBS branches that existed in 1990 were closed by 2004. The UK already has the lowest density of BBS branches compared to Europe. The closures have left an estimated 800 communities without a single bank branch. Although rural areas are predominant targets, deprived areas of cities are not exempt. A 1998 survey by the New Economics Foundation found that London lost 20% of its branches between 1990 and 1995. It should be noted however that the trend of branch closures ceased in 2000-01, nevertheless the CCBS believes that the trend could continue again in 2004-05. Approximately a thousand more communities are at risk of losing their last branch.

  10.4.  We and CCBS have lobbied for shared branch banking as a solution to this problem but no progress has been made.

  10.5.  Instead the banking industry has turned to the Post Office as a solution for consumers to access and manage their accounts. However Post Offices too have been subject to branch closures, with over 1,500 branches closed since 2002, and there is a programme to shut down at least 1,700 more. Moreover, many of the ATMs installed in and around Post Offices are or soon will be charging. According to the Nationwide ATM report, over 70% of the ATMs in Post Office machines charge a fee.

  10.6.  The impact of branch closures on ATM availability is difficult to ascertain without detailed mapping of the present and future situation regarding free non-branch ATMs. We would like to see the financial institutions and IADs providing detailed information on the localities where new surcharging ATMs will be cited. To provide some impetus for this, we have undertaken the precursor to such a project.

  10.7.  For a sample of 58 of the 800 communities that the CCBS have identified as branchless, we conducted some rudimentary non-scientific research to assess access in those communities of free and charging ATMs. For each community name supplied to us by the CCBS, we used the "ATM Locator" tool on the LINK website to map the closest five free and surcharging machines to the given epicentre. Of the 58 communities assessed:

    —  Only 4 communities (6.9%) had no ATM less than 2 km from the epicentre;

    —  24 (41.1%) had a free ATM within 1 km of the epicentre;

    —  21 (36.2%) had a free ATM within 2 km of the epicentre;

    —  13 (22.4%) had a free ATM between 2 and 4 km of the epicentre; and

    —  For 24 communities (41.1%), the closest free ATM was 4 km from the epicentre or further.

  10.8.  Our findings would suggest that branch closures are indeed having an impact on consumer's free access to their own money. In view of the economics of cash machines, we think these "free ATM black out areas" are likely to increase significantly over the next few years.

  10.9.  As ATMs convert from free to surcharging machines, groups of people living in affected areas will be ostensibly forced to use surcharging ATMs for their primary cash access. While we agree that surcharging ATMs are reasonable as convenience machines where consumers can exercise clear choice, we are seriously concerned that matters of financial exclusion and location will make "convenience" machines used for more than they were designed.

  10.10.  This is particularly disturbing in an era where consumers have salaries, benefits or pensions deposited directly into their current account (the latter two as a result of a clear government policy). Consumers are effectively being taxed to access their own pensions and benefits. We think this is deplorable and must be reversed.

  10.11.  Our response to this specific access/exclusion issue is three-fold:

    —  First, we would like to see the banks and building societies establish shared branch services. We have long campaigned for this with the CCBS.

    —  Second, in the certain communities where even shared branches are clearly not justifiable, the banks and building societies must commit to ensuring that these communities are served by free non-branch ATMs.

    —  Third, we would like to see some exemptions for those individuals who rely on state support to meet basic living costs. The technology should be developed so that ATM cards belonging to current accounts receiving (for example) income support, disability allowance, or pensions are earmarked to be exempt from ATM surcharges.

37   APACS, ATM Survey 2004, p. 6. Back

38   Cardpoint, Acquisition of the Remote Cash Machine Estate of HBOS, "Letter from the Chief Executive of Cardpoint plc", 26 May 2004, p. 10. Back

39   We use the term "free" throughout this document to mean "non-surcharging". In fact no ATM usage is truly free, the cost of non-surcharging transactions are merely borne by the owner of that ATM, which are passed on to consumers in other ways. Back

40   Source: LINK and APACS. Back

41   Some of the non-branch ATMs owned by Co-operative Bank and Alliance & Leicester levy a surcharge. Data on these charging estates are not available. Back

42   Source LINK. Back

43   Nationwide calculations. Utilisation rate from LINK. Back

44   APACS ATM Survey 2004, p. 4.; and LINK telephone discussion. Back

45   Nationwide, Free Cash Machines Under Threat, Sep 2004, p. 3. Back

46   Cardpoint, "Letter from the CEO of Cardpoint plc," 26 May 2004, p. 10. Back

47   18 (0.1%) are operated by Independent ATM Deployers (IAD). Source: APACS ATM Survey 2004. Back

48   Analysis of APACS ATM Surveys 2002-04. Back

49   Source: Moneybox advertisement for convenience machines. Back

50   Source: APACS 2003. Back

51   APACS ATM Survey 2002. Back

52   Analysis of ATM Surveys 2001-02. Back

53   This comprises of stores, supermarkets, department stores, national retail chains, restaurants, public houses, night clubs, bars, cafes, sports and leisure centres, hotels, campsites, gambling, cinemas, stadiums, and zoos. Source: APACS ATM Survey 2004. Back

54   Source: LINK. Back

55   Letter from the Chief Executive of Cardpoint to Shareholders, Cardpoint Annual Report 2004, 22 Nov 2004. Back

56   See for example advert for Moneybox ATMs in small business publication. The lease for a convenience ATM is about £124 (+VAT) per month. Total risk £1,484 + VAT against £4,635 returns from transaction revenue (assuming 5-6 withdrawals per day). The advert also promotes free BT telephone line installation. Back

57   APACS 2004. Back

58   Source APACS 2003. These include railway and transit stations, airports, post offices, motorway services, shopping centres, workplaces, and moving locations such as exhibitions. Trend analysis is not possible, because data breaking down the UK non-branch network in this way for previous years is not available. Back

59   Not surprisingly, a machine at London's Liverpool Street Station was the busiest ATM in the UK in 2002. It dispensed over £1.7 million in December of that year, five times the national monthly average. Source: APACS ATM Survey 2002. Back

60   See Chart in Appendix A. Back

61   Cardpoint Annual Report 2003-04, Letter from CEO to Shareholders, 22 Nov 2004. Back

62   Market share data: Mintel Current Accounts report, January 2004. Back

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