Future of ATMs
I am delighted to rise to speak to an issue that I am tempted to say affects all constituencies throughout the country: the future of automated teller machines and their provision to our constituents.
By way of introduction, I should say that this debate was triggered by LINK—the body that co-ordinates most of the ATM network and sets the rules for ATM providers —which has proposed and confirmed changes to its interchange fees, following a rather flimsy four-week internal consultation with its bank and ATM-provider members. The core of the proposal is that LINK will reduce its interchange fees by 20% over a four-year period, from 25p to 20p per transaction. The first 5% reduction—from 25p to 23.75p—is set to take place on 1 July this year. Interchange fees will then reduce by another 5% on 1 January next year, with a further 5% reduction in fees expected again in January 2020 and again in 2021.
Concerns have been expressed by Members from all parties and by organisations as diverse as Which? and the Federation of Small Businesses. More importantly, because they are key to the network, ATM machine providers—companies such as Cardtronics—have made significant representations to us. This issue is potentially so serious that the Treasury Committee has been hearing evidence on it. In a statement on 31 January, the Chair of that Committee, my right hon. Friend the Member for Loughborough (Nicky Morgan), said:
“Any significant reduction in free access to cash would be an unacceptable outcome. This will be the first major test for the Payment Systems Regulator. They must ensure that customers do not lose out as a result of LINK’s proposals.”
I shall return to the PSR in a moment or two.
LINK’s proposal comes against the backdrop of significant bank closures, an issue that is often seen through the prism of a rural telescope, but which also affects larger market towns, suburban areas and large city centres. The cri de coeur usually goes up from the banks, as they reduce their estate, of the need to use digital banking. That is an easy solution for very many people and indeed it is very popular—I use it myself—but in rural areas where broadband speed is not as fast as it needs to be and mobile telephone signals might not be strong enough to enable people to log on to banking services, our banks have been very much at the heart of communities, socially and commercially. With their closures, access to cash through ATMs becomes even more pivotal. There was the flimsy consultation by LINK of its members, who clearly have the whip hand, but there was precious little, if any, identifiable engagement with or consultation of consumers in our communities. I am happy to stand corrected, but I believe nothing came through to Members of Parliament suggesting what LINK might be doing.
Reliance on ATMs grows. I know that the Treasury and my hon. Friend the Minister, who I welcome to his place and with whom I have discussed this issue, believe that the use of cash is decreasing. I am sure that he will give us the up-to-date statistics on that, as there is a trend in that direction. The death of cash has long been predicted, but has never actually come about. It has declined by about 34% in the past decade or so, but there is still a need for cash. I am tempted to say that, disproportionately, the need is among our older people—65% of my constituents in North Dorset are over the age of 70—and those on low or fixed incomes who find managing their weekly budgets much easier via cash transactions than merely by contactless payments or by using some other form of card.
Access to the cash that ATMs dispense clearly provides for a social and financial inclusion agenda. You do not have to take my word for it, Madam Deputy Speaker. It is amazing when people turn up whom one vaguely knew at university. A friend of mine from university days—yes, I can remember that far back—happens to be the chief cashier at the Bank of England. Victoria Cleland is quoted in The Guardian—I was given this quote, as The Guardian is not the newspaper of choice necessarily in the Hoare household—saying that the predictions of the death of cash are premature and that
“cash is definitely here to stay.”
When the chief cashier herself says
“I personally don’t really use contactless”,
that perhaps says something about the over-reliance of some of our service providers on technology, as they neglect the fact that not all our constituents, including the chief cashier of the Bank of England, feel terribly comfortable using it.
I am very grateful for the submissions that I have received from the Association of Convenience Stores. It does not support the LINK decision. It represents 33,500 convenience stores, and in rural constituencies such as mine where the out-of-town shopping mall and the large superstore is not common, such stores provide not only a retail function but will often host an ATM as well.
I congratulate the hon. Gentleman on securing this important debate. I know that the turnout today reflects not the importance of the debate, but the weather. Does he share my concerns about the comments of the chief executive of LINK who went on record before Christmas in the Daily Telegraph, saying that cash machines will largely disappear, and completely disappear in rural areas? Is that not an odd comment from the chief executive of LINK, which is charged with a public service remit to protect cash?
It is not only odd; it is both perverse and totally contrary to the expectations of the regulator and the duties that LINK ascribes to itself. I will come in a moment to the role of the Government, particularly the Treasury, in this issue. There is a real danger of constituents being caught in a pincer movement between competing business and commercial interests. There are duties or expectations of the regulator, but it has no real teeth to deliver. If the hon. Gentleman bears with me, I hope to come to that in a moment or two.
The Association of Convenience Stores does not support LINK’s decision. It has raised a number of issues, including bank closures, saying that
“the withdrawal of ATMs has increased the role that ATM providers and convenience stores play in providing consumers with access to cash.”
Of course, ATMs hosted in convenience stores and other retail outlets also provide benefits to the high street and other shopping parades by providing access to cash to facilitate consumer spending. Wanting, quite properly, local money to be spent locally is one of the major arguments deployed by the Federation of Small Businesses with regard to its concerns.
LINK has suggested that retailers could fill the gaps in the ATM network through cashback services. Again, in theory it is probably right. However, the practice of a one or two-man shop—or, indeed, a one or two-woman shop—in an isolated rural setting holding enough cash not just to deal with transactions, but to hand money to people on a cashback basis totally neglects the impact of the insurance premiums that those retailers would have to incur, often in marginal retail businesses. That is not to mention the security concerns of staff working in those shops at a time when rural policing is not of a high visible profile. It seems a rather dangerous premise on which to base a strategy.
I am very grateful for the support of 41 colleagues from across the country and across this House who wrote to Hannah Nixon, the managing director of the Payment Systems Regulator, who has been both punctilious and courteous in her dealings with me. We outlined our concerns in our letter of 29 January, highlighting the potential disproportionate impact on rural areas, although we did not limit our concerns only to rural areas. Again, I thank Hannah Nixon for her promptness, as she replied on 31 January. Her response gave some comfort, but not enough.
I urge the Treasury Bench to think about these things. I appreciate and understand that we want a light touch when it comes to regulation, but a light touch does not mean contactless. A light touch does not mean that we just pull away and let things evolve as is seen fit. Indeed, a number of concerns have been expressed, particularly by the providers of the machines, in relation to what happened across the pond in the United States. LINK here has predicated its decision to reduce the interchange fee primarily—or certainly in great part—because of changes in the market by other providers, such as Visa. We always used to say that when the United States cough, 20 years later we will probably get the cold. The race to the bottom in reducing overheads through the interchange fee in the United States has led to a significant reduction in the provision of ATMs and in access to cash, often for the poorest American citizens. Let us learn from that example. Let us be alert to it.
I return to the letter of 31 January from Ms Nixon. Two words cause me some concern. She tells me and the other MPs who signed the letter that the Payment Systems Regulator has made
“clear to LINK what we expect”
“Promoting the interests of users is one of our statutory objectives”.
I am tempted to say that promoting is good, but protecting—looking out for—would be better; and demanding and ensuring, rather than expecting, would give us more cause for comfort.
Sturminster Newton is a very pretty market town in my constituency that saw its last bank close last year. That has been sad. It has had a huge impact on residents and on businesses within the town. My very good friends Andrew Donaldson and Chris Spackman—excellent town councillors and diligent local public servants—have been trying to fill the gap that this has created. The town does have a couple of ATMs, but their capacity is small in terms of the volume of cash they can hold, and one of them has very poor reliability. They were just on the cusp, with Cardtronics, of delivering a new ATM for the town. We should bear it in mind that when Lloyds had its ATM, it was dispensing £180,000 per week, rising to about £200,000 when big events were going on, such as the annual cheese festival.
Councillor Spackman contacted Cardtronics and was put in touch with its EU corporate director. Very helpfully, it was going to come and deliver a new ATM, but that was pulled, citing
“recent proposed reductions to the Link transaction fees”
“had reduced the viability of our ATM making it uneconomic for them”—
that is, Cardtronics. He said that he
“doubted any other operator would be interested in installing an ATM in Sturminster Newton”
and that as a result
“there would be ‘cash deserts’ in rural areas”.
Sturminster Newton is quite a small town of about 4,500 people. However, the rural catchment—I declare an interest as it includes the town that my wife and I look to for service provision—has about 18,000 people. Therefore, 18,000 people in a sparsely populated rural area now have real difficulty in getting hold of cash.
I have tabled a number of parliamentary questions, and I am grateful for the answers that my hon. Friend the Minister has given. I drew particular comfort from a letter I received on 7 February from my hon. Friend the Member for Salisbury (John Glen) in his capacity as Economic Secretary to the Treasury. He says in the third paragraph:
“I know you have an interest in this issue. The Government has always aligned with MPs on the question of continued widespread free access to cash, and made it clear to LINK that while sustainability of the ATM network is important, it must not put this access at risk.”
So the Treasury Committee, consumer organisations such as Which? and the Association of Convenience Stores, very many Members of Parliament, Cardtronics as a representative of the ATM providers, and my hon. Friend the Economic Secretary are drawing together a coalition of interest and concern to ensure access to banking and access to cash through the ATM network. I have sat and listened to, and read, submissions from LINK, Cardtronics, and others. Earlier this week, there was a very useful event upstairs in one of the Committee Rooms where both organisations were able to make presentations, and information has been submitted by the regulator.
I ask the Government to accept this point: while the use of cash is on the decline, its death has been greatly exaggerated. Technology will not always fill the gap, and cash will always provide a very important mainstay in our economic and retail life. Against that backdrop, the regulator clearly has a remit, and LINK has an aspiration. The Minister represents Newark, a constituency that in its size and demographic is probably not that dissimilar from my own, and indeed from that of many other Members. I see that his Parliamentary Private Secretary is my hon. Friend the Member for North Cornwall (Scott Mann), who I have no doubt has similar issues in his constituency.
I encourage the Minister not to take a laid-back approach to this. We must hold people to account and ensure that the regulator has the confidence to be as muscular as possible. The current trend that the regulator and LINK seem to have of retrospective review and analysis of how these things have panned out is not good enough and is not giving comfort to me, as the Member of Parliament for North Dorset, to many colleagues across the House and to our constituents that we are looking out for their interests and seeking to preserve their access to a robust and reliable ATM network.
May I begin by wishing you, Madam Deputy Speaker, and other hon. Members a happy St David’s day? As the subject of today’s debate is cash and its availability, I wish the same to the staff of the Treasury’s Royal Mint in snowy Llantrisant today. I had the pleasure of visiting them last month for the appointment of the Royal Mint’s first ever female deputy master and chief, Anne Jessopp. Anne is the first woman to hold that post since the Mint was founded in 886 AD. It has taken just over 1,000 years, but a woman is now finally in charge at the Mint, and as my hon. Friend the Member for North Dorset (Simon Hoare) said, a woman is the chief cashier at the Bank of England.
One of Anne Jessopp’s first tasks as deputy master of the Mint was to launch the 50p piece that the Mint has created for the 100th anniversary of female suffrage. Unfortunately, although those coins are available online at www.royalmint.com and can be purchased by visiting the Royal Mint, not many of them will enter circulation. That is because there is limited demand for new coinage. Therefore, the Mint, over the course of this year, is unlikely to require new 50ps. Therein lies part of the heart of today’s debate: the use of coinage and notes is in decline, and digitisation is transforming the way we use cash and spend money, as it is every other aspect of our lives.
I am grateful to my hon. Friend for raising this important issue. The relatively few Members who were able to join us today due to the poor weather is no reflection of the importance of this issue to either the Government or Members of Parliament. First and foremost, I want to assure Members that the Government recognise the importance of widespread access to free cash, and we will do everything we can, with the industry, the regulators and LINK, to ensure that access is maintained.
I want to address three areas, which I hope will allay some of the concerns that my hon. Friend raised and speak to how important this is to the Government. The Treasury and I personally will be following this extremely closely as it develops in the months and years to come.
First, as my hon. Friend laid out well, the increasing digitisation that we are experiencing across society is having a major impact on cash. It has been important already, and I think its impact will be quite profound in years to come. That plays into a wider debate that the Treasury is interested in and in which all parts of Government have to engage, which is how we can embrace the new and ensure that the United Kingdom makes the most of new technology and does not shy away from it. We cannot stop the world and get off it, but we have to protect the vulnerable in society and ensure that the benefits of new technology work for all people in all parts of the United Kingdom, whether in great cities such as London or in rural areas such as Dorset, Nottinghamshire, Cornwall and the others represented here today.
The use of cash has fallen from 62% of all payment volumes in 2006 to 40% in 2016, the last year for which we have reliable figures, and it is predicted that, by 2026, it will make up just 21% of all our payments. As my hon. Friend rightly pointed out, however, claims that we will move any time soon to a completely cashless society are off the mark. The use of cash—both coinage and notes—will continue to decline significantly in the years ahead, but it seems unlikely that any of us will live in a country without any form of cash. That poses an important challenge to Government on how we can manage this period of transition in a way that works for everyone.
Cash remains extremely important in the day-to-day lives of UK consumers and businesses. It is still the form of payment that the UK public reach for the most, and 5% of the adult population rely either entirely or almost entirely on cash to make all their day-to-day payments. Many of them, of course, are the most vulnerable, the most financially excluded and the most elderly members of society.
To provide free access to cash, the UK has one of the most extensive free-to-use ATM networks in the world. Compared with our major international competitors, including the United States, our network is extensive and generally free, and those are important things that we want to continue. There are more ATMs in the UK than ever before, about 54,000 of which are free to use, which represents an increase of 50% in the past decade alone.
Is not the Minister concerned that the LINK decision on the interchange fee might reverse free access to cash? The problem is that LINK is relying on the ATM operators themselves to tell it when cash machines are no longer financially viable. Is not it the case that many machines may already have closed after the event?
The hon. Gentleman raises an important point, which I hope I will be able to answer over the course of my speech. One of the motivations for LINK and the industry’s actions is to reduce modestly the number of ATMs in those areas with the greatest density, including cities such as London, but their pledge to the Government and to consumers, which I will go on to talk about, is that that will not be to the detriment of those in rural areas, market towns or harder-to-serve areas, which are not exclusively rural but could be areas of greater deprivation, even in cities such as London. We have had a fairly strong promise from LINK and from the regulator that there will be no detriment to rural areas. I will come on in a moment to how that will be enforced in practice.
We all recognise that there is a decline in the use of cash, which is making it harder to maintain our current level of free access to cash. That is the challenge that the changes hope to address. I appreciate that we have to view the issue through the lens of bank branch closures, which affects my constituents and those of most Members across the House. The Government, the financial services industry and the regulator therefore have to act to ensure that the needs of the consumer continue to be met. My comments, on behalf of the Government, represent consumers, not the regulator or LINK. My hon. Friend the Member for North Dorset is absolutely right that we in this House represent the consumers, and their interests must be our primary concern.
Secondly, I wish to address exactly how we do that, which brings me to the particular role played to date by the Payment Systems Regulator and the role it will play in the future, if it lives up to the Government’s expectations. In November, LINK—the main payment scheme behind the UK’s ATM network—launched a consultation on reducing interchange fees by 20%. As I have said, that was designed to reduce the duplication of cash machines in city centres while protecting the more isolated machines. That is the organisation’s stated objective, to which we will hold it to account. At the time, the Government and many Members of this House were clear that any changes must not have a harmful impact on consumers. If machines are lost in cities, the impact should be generally imperceptible, and if they are lost in rural and harder-to-serve areas, they should be replaced, wherever possible.
I agree with my hon. Friend about the overprovision of ATMs in a city centre environment, but I just want to make sure that he is alert to the fact that ATM providers—the Cardtronics of this world—often use the moneys they secure from such machines to subsidise rural provision. In effect, they are cross-accounting. The opportunity to use that cross-subsidy spare fund will, in effect, disappear as a result of a diminution of ATMs in large cities. That is one of the big problems.
My hon. Friend raises an important point to which the regulator must pay close attention, but it estimates that the impact of the changes will be modest, even in city centres with a heavy density of ATMs. The main operators of card machines—the companies he mentioned earlier—are generally financially successful. This industry has more than £1 billion of revenue a year, and its market caps are between £500 million and £1.5 billion. Generally speaking, these sizable businesses are in sound financial health. There is no reason to believe that the changes will alter that, although the regulator must bear that factor in mind.
The PSR, which the Government established to deal with such difficult issues, has taken the lead in examining the area. It has engaged with LINK and held a consultation. My hon. Friend raised concerns about the scope of that consultation, but the PSR believes that it has engaged with MPs, although perhaps not as much as it could have done. It has spoken to a number of different parties across the country—indeed, future consultations could learn lessons from the number of individuals and parties to whom it chose to reach out.
The PSR has come back with three requirements that LINK’s proposals must fulfil. First, there is a commitment by LINK to do “whatever it takes”—we must remember those words—to protect the broad geographical spread of free-to-use ATMs. Secondly, any cuts in the interchange must be incremental, and at just 5% in the first year. There will be a review after one year, so in July next year there will be a review before the next cut of 5% could, or would, be implemented. I have received assurances from LINK and the PSR that no further cuts will take place unless they are satisfied that there has been no significant material detriment to the rural and harder-to-serve areas. Thirdly, there will be a greater than ever focus on financial inclusion, and LINK will continue filling gaps in the network and protecting those ATMs in areas that are harder to serve.
LINK will maintain all free-to-use ATMs that are a kilometre or more from the next or nearest free-to-use ATM, including where a community loses ATM access because of a branch closure. LINK will increase the subsidy for ATMs in areas with poor cash access to keep free-to-use machines going. It will conduct an annual review not just in the first year but, if the changes continue, every year thereafter. That review will consider the impact of the interchange fee reduction on the provision of free-to-use ATMs as phased in over the four-year period, and take action as and when required.
LINK has promised to place a page on its website from 1 July that will have sufficient specificity for every Member of the House to look at their constituency. It will show every free ATM across the country, so MPs will be able to view availability in their part of the world. The website will highlight any areas where free ATM availability is in danger of being lost and state what action is being taken to tackle that. For example, my hon. Friend will be able to look up the ATM that we have heard about in his constituency and see whether it is in danger and what action is being taken to address that. That is important to ensure that MPs and people across the country—including those local councillors who were mentioned—can continue to monitor and ensure that LINK lives up to its promises.
Finally, the way that the PSR will police LINK’s commitments can, and should, be stringent. We set the PSR up in 2015 with a specific statutory objective to ensure that the interests of the users of payment systems—not those of the banks—are promoted, with robust powers to enforce that. We expect the PSR to step in and act if needed. I have spoken to the PSR and to LINK, and the PSR understands the importance that the Government place on free access to cash, and the strength of feeling in Parliament and the country. Both organisations have made an explicit commitment to do whatever it takes to maintain the network and provide an additional subsidy per ATM at whatever level is required, to ensure that any machine that is in danger of being lost is replaced by another within a reasonable distance.
In conclusion, I again thank my hon. Friend the Member for North Dorset for raising this important issue that affects my constituents and people across the country. I have been assured by LINK and the PSR that the motivation for these changes is to ensure that the proliferation of ATMs in urban areas is sustainable, and that we continue to have a free-to-use ATM network—an important issue for the whole country and one that sets it apart from many others—but not at the cost of harder-to-serve areas: the rural areas and the market towns. The promise made to me by LINK is that it will do whatever it takes. The pledge has been made to me by the regulator that it will robustly hold LINK to account for that. The Treasury and I will be watching both very hard to ensure that those pledges are fulfilled on behalf of the people of the country.
Question put and agreed to.
Motion made, and Question proposed, That this House do now adjourn.—(Wendy Morton.)