Bank cost-cutting threatens free cash machines

A general view of HSBC cash machinesImage copyright
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The future of thousands of free cash machines is in doubt as bankers demand a cut in the cost of running the Link network.

They are calling for a 20% reduction in a fee the bank incurs if customers use free machines in shopping centres, supermarkets and railway stations.

Insiders say the system “makes no economic sense” as cash withdrawals are on the decline.

Debit card and contactless payments are taking over, they say.

One independent ATM operator said a quarter of free-to-use sites could be lost.

About 53,000 of the 70,000 Link cash machines are free to customers, but the system still has to be paid for.

Who picks up the bill?

When you withdraw cash from a machine which does not belong to your bank, there is an interchange fee which your bank has to cover.

The fee is 17p per transaction from a branch ATM and 12p for a balance enquiry.

This fee is paid by the customer’s bank to the bank that owns the ATM where the withdrawal is being made.

But at a non-bank machine of the sort outside shops and stations, the fee is 25p for the cash plus 15p to check your balance, which gets paid to the independent ATM operator.

Banks have been discussing for months how to bring down the cost, which has risen to over a billion pounds a year. The banks think the fees paid to the independent operators is too high.

Link is understood to be proposing a 10% cut in the 25p interchange fee for non-branch withdrawals, which would eat into independent operators’ profits.

A separate plan has just been put on the table by one of the High Street banks, calling for a reduction much closer to the 17p branch rate.

That would slash 20% or more from the cost to the banks.

But Peter McNamara, chief executive of independent operator Note Machine, warned that such a squeeze being proposed by Link would result in more customers being charged.

The free-to-use machines would not be economical, so there would be a charge, or they would simply cease to exist.

“We estimate that you could be losing up to a quarter of the free-to-use ATM sites in the UK,” he told BBC Radio Five Live.

The 39 Link members, including banks and independent ATM firms, will meet next Thursday to start negotiations on the plans.

There could be a decision on the issue within weeks. Bankers looking for a cut in fees need to muster 80% of the votes of Link members to get their way.

What if they don’t? Could there be a return to the dark days of the the 1980s when banks and building societies didn’t work together and people had to use one of their own provider’s machines?

Most banks say they want their customers to keep free access to cash and they are desperate to avoid Link being undermined.

And there’s a new watchdog for the network, the Payment Systems Regulator, who might step in and dictate a solution if Link’s members fail to reach an agreement.

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