LINK Proposals for funding the free ATM Network

LINK is consulting its Members and the LINK Consumer Council on proposals to reduce the level of interchange - the fee paid by card issuers (banks and building societies) to ATM operators. The proposals include:

• A 20% reduction in interchange rates over the next four years, from around 25p to 20p per cash withdrawal. This will retain an extensive network of free ATMs for consumers, whilst avoiding the growth in ATM numbers that has occurred over recent years, despite declining consumer demand for cash for payments.
• The proposed reduction  in interchange of 5% per year is intended to give ATM operators the opportunity to reduce their costs through efficiencies and minimise any reduction in ATM numbers.
• Boosting LINK’s Financial Inclusion Programme to maintain extensive free access to cash for all in the UK. This builds on existing measures that ensure provision of ATMs in deprived communities, where demand would not otherwise make one viable.
• Maintaining the present geographical spread of ATMs, with any reduction in the number of ATMs intended to be in areas where there are currently multiple ATMs very close together. Around 80% of free-to-use ATMs currently are within 300 metres of another free-to-use machine.

The proposed changes are a result of a predicted fall in consumers’ demand for cash for payments as they increasingly move to alternatives such as contactless and online payments. Data from UK Finance predicts that over the next ten years, the number of cash payments will fall by 43% to 8.7 billion payments, with the total value predicted to fall by 23% to £185 billion in 2026¹.

The number of cash machines in the UK is currently at near record levels, with more than 70,000 ATMs across the country, around 80 per cent of which are free-to-use.

LINK’s CEO John Howells commented: “LINK is committed to maintaining an extensive network of free-to-use cash machines. Free access to cash is vital for UK consumers and LINK intends to maintain this for many years to come.”

The interchange rate was previously set by ATM industry participants, as part of the LINK Network Members Council. Responsibility for setting the interchange rate has now moved to the independent LINK Board, which has a clearly defined public interest remit, in order to meet regulatory requirements on the governance of payment systems².

The views of LINK Members and the LINK Consumer Council are being sought by 30^th November 2017 and it is expected that the Board’s final decision will be published by 31^st January 2018 and implemented by 1^st April 2018.

A public summary of the Member consultation can be downloaded here.

1) https://www.ukfinance.org.uk/cash-still-king-but-crown-is-slipping-as-consumers-turn-to-contactless/ 

2) Bank of England Code of Practice and supervisory statement relating to governance of recognised payment system operators. http://www.bankofengland.co.uk/financialstability/Documents/fmi/governance0617.pdf