Memoranda submitted by Which?
RE: INQUIRY INTO CASH MACHINE CHARGES
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. 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. 
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). Over
half of these (59%) are branch ATMs, while the rest are non-branch
(also called "remote") machines. 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.
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). 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withdrawn.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. 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. According
to Nationwide, the last 6 months to Sep 2004 alone saw an increase
in charging ATMs of about 40%.
2. SUMMARY OF
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
2.3 As for the fee on surcharging ATMs,
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. HISTORY OF
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
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;
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
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. BANK AND
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. 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
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. 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
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. 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. Proportions
of the indoor machines are also declining further year-on-year.
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. 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,
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
It is concentrated. Of the 9 significant
IADs, four own 68% of the market:
Hanco at 25% was recently been acquired
Cardpoint (which bought a quarter
of HBOS's machines) at 14%; and
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".
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. 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
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.
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
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. PUBLIC SPACES
7.1 These are ATMs in airports, railway
and underground stations, motorway services, post offices, and
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".
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. 
HBOS NON-BRANCH ATM ESTATE
(as at March 2004)
|Corner shops, newsagents, etc
|Sports centres, gambling, etc||7
|Bars, pubs, clubs||29
|Railway stations, etc||26
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. 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
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. 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
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. FAIRNESS AND
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
The surcharge subject to a cap. We think the surcharge
cap of about 7% to a maximum of £1 is reasonable and should
9. TRANSPARENCY OF
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 askedfrom a listwhen
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
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
10. FINANCIAL EXCLUSION
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.
APACS, ATM Survey 2004, p. 6. Back
Cardpoint, Acquisition of the Remote Cash Machine Estate of HBOS,
"Letter from the Chief Executive of Cardpoint plc",
26 May 2004, p. 10. Back
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
Source: LINK and APACS. Back
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
Source LINK. Back
Nationwide calculations. Utilisation rate from LINK. Back
APACS ATM Survey 2004, p. 4.; and LINK telephone discussion. Back
Nationwide, Free Cash Machines Under Threat, Sep 2004, p. 3. Back
Cardpoint, "Letter from the CEO of Cardpoint plc,"
26 May 2004, p. 10. Back
18 (0.1%) are operated by Independent ATM Deployers (IAD). Source:
APACS ATM Survey 2004. Back
Analysis of APACS ATM Surveys 2002-04. Back
Source: Moneybox advertisement for convenience machines. Back
Source: APACS 2003. Back
APACS ATM Survey 2002. Back
Analysis of ATM Surveys 2001-02. Back
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
Source: LINK. Back
Letter from the Chief Executive of Cardpoint to Shareholders,
Cardpoint Annual Report 2004, 22 Nov 2004. Back
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
APACS 2004. Back
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
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
See Chart in Appendix A. Back
Cardpoint Annual Report 2003-04, Letter from CEO to Shareholders,
22 Nov 2004. Back
Market share data: Mintel Current Accounts report, January 2004. Back