Is this the end of the ATM?
It could make life much more expensive for the poor, elderly and less digitally literate
Estimates suggest that anywhere between 700 and 1,000 bank branches were closed during 2017, with more to go in 2018. But their loss isn’t the only challenge facing consumers who prefer – or have no choice but – to use cash.
In July The Daily Telegraph reported on the closure of the penultimate bank in the Devon town of Dartmouth. Residents feared the town’s population of 6,000 would be left stranded, having to travel 20 miles to get to their nearest bank.
At least, they said, they could transfer their accounts to Natwest, the town’s last remaining branch. Natwest’s Christmas message to Dartmouth customers was that their branch, too, would be closing.
ATMS face withdrawal too
Branch closures forced customers who wanted cash to take it from the network of “holes in the wall”. Now these too, could be under threat.
In November, Link, the network that facilitates the overwhelming majority of ATMS in Britain, announced controversial changes to its charging structure which, experts say, will prompt banks to close thousands of ATMS.
Currently, when you use a free cashpoint, your card issuer pays the operator of the ATM 25p, but Link is now consulting on reducing this fee to 20p – with a final decision expected at the end of this month. Banks which operate the largest number of machines are expected to shut many as a result of this drop in revenue – particularly where the majority of users are customers of rivals.
Ron Delnevo of the ATM Industry Association said these changes risk creating “ATM deserts” were people have no access to cash at all. Dartmouth, which after Natwest’s closure will have only three ATMS is a prime example. Mr Delnevo added: “What the banks want to happen is they close their branch and take away the ATM and then everyone goes online and makes cashless transactions. They are trying to wean the country off cash.”
The threatened withdrawal of ATMS has led consumer group Which? to demand a review by the Payment Systems Regulator, and has prompted Nicky Morgan, the chairman of the Treasury committee, to write to Link expressing concern over people’s access to cash.
Link argues that the change is unlikely to have effects as drastic as claimed. A spokesman said there are currently “too many” ATMS in Britain, most of which are in urban areas and fewer than 300 yards apart.
According to the World Bank, Britain has 129 ATMS per 100,000 people. France, with a similar population, but a far greater landmass, has 104. He also said that the network’s “financial inclusion programme”, which is designed to protect access to cash in rural areas, is being bolstered. If a bank branch does close, for instance, Link can increase the interchange fee in the area encouraging the retention of the ATM.
Banks argue that the raft of branch and ATM closures have been driven by changing customer habits. In the past decade the number of people regularly banking online has increased from less than a third to 63pc, the industry claims.
Natwest says that since 2014 the number of its customers banking online has increased exponentially. And in the first half of 2017, 1.1billion mobile transactions were carried out, an increase of 41 per cent on three years before.
At the same time, it says, fewer people are visiting branches. A spokesman said that only 78 customers had been visiting the Dartmouth branch on a weekly basis and close to 90 per cent were already banking “in other ways”.
The ‘digital divide’
The decline in face-to-face banking, coupled with the rapid rise of cashfree payment systems – like contactless cards and processes such as Apple Pay – appears to be ushering us closer to a society completely free of cash. Open banking, where institutions share customers’ data and as a result can offer them better deals, is another way in which our interactions with banks are becoming more dependent on the internet.
But experts say that while millions benefit, life is getting harder – and costlier – for those who still wish to use cash and for those who don’t want to go online.
Janet Morrison, the chief executive of charity Independent Age, alleges
that banks are making their services “digital by default”.
Statistics from Link show ATMS remain as popular as ever. Since 2000, the number of annual cash withdrawals in Britain has doubled to more than two billion. And the total sums being withdrawn remain constant.
Gail Richmond, chairman of the Dartmouth branch of the U3A, an educational group for retirees, said: “We will soon have just three ATMS. When we had the last regatta, that cashpoint did an awful lot of business.”
For those unwilling, or wary, of using internet banking there are a few alternatives. Most high street banks still offer telephone banking services which will suit many customers, although newer banks require customers to use smartphones.
Natwest said it will be introducing a mobile branch to Dartmouth and will shortly be communicating a proposed timetable to residents.
‘The banks are trying to wean the country off the use of cash’
Open banking. Sounds great, doesn’t it? An end to all that secrecy and confusion. Banks are finally going to open up, tell us how they work, how their baffling security procedures are formulated and how they calculate their interest rates, right? If only. Open banking just means you – the consumer – being more open with your own data.
The scheme, which allows banks to reveal your financial information to other companies, with your permission, is coming in less than a week. It’s meant to mean you can access better deals and is widely touted as a power shift in favour of consumers. But it could also make life much more expensive for some of society’s most vulnerable groups: the poor, elderly and less digitally literate.
For a start, those who prefer to stick to branches and letters through the post will effectively be excluded. Britain’s dwindling army of analogue stalwarts might think this is no bad thing. After all, the data protection implications are extremely concerning. A series of high-profile hacks has proved that, however watertight companies claim to be, they are remarkably leaky when it comes to customers’ data. Spreading your information around only raises the chance that it will be stolen.
Consumer groups have warned that it could exacerbate the already serious problem of confidence tricksters who call customers pretending to be legitimate bank employees to scam them out of their money. With some banks cautioning them to check the companies they grant access to are “authorised to carry out the services they are offering”, customers, as well as having to distinguish a real bank employee from a very convincing fake, are expected to carry out credential checks on financial institutions.
It will be stressful enough for the computer literate, but for those who did not grow up with technology and do not regularly use it, you might as well ask them to code the websites themselves.
But there will be a cost to opting out. With an increasing number of services – from pensions, to benefits, to court cases, listings, and papers – moving onto the internet, the elderly, the poor, those without the money, skills or opportunity to go online are already excluded from accessing some of the best or more convenient deals. Banking is no different. One HSBC account effectively pays new customers £50 for signing up to online and mobile banking.
Under open banking, the existing divide between active, confident consumers and their passive, smartphone-less peers will only grow.
Most obviously, the paper-bound consumer is not going to be aware of the better deals that this whole initiative is supposed to throw up.
And there’s another – more insidious – side to this. Some paper-bound customers might be tempted to give in to the relentless march of digital progress, and switch to an online account and opt in. But if you do so, banks, insurance companies and others will have access to an unprecedented level of information about your spending habits. They will be able to work out how much you follow Olivia Rudgard on Twitter @Oliviarudgard; read more at telegraph.co.uk/ opinion spend and how reactive you are to changes in interest rates, insurance premiums and account fees.
Customers who are less experienced with the internet are more likely to have allowed their savings rate to drop to 0.01 per cent, or let a car insurance premium auto-renew until they’re paying double what they should be. So companies will have them down as an easy target for bad rates and price hikes. If you’re a savvy consumer who switches accounts regularly, only goes for the best rates and uses comparison sites, they know you’ll spot a bad deal – and will only offer you good ones.
There’s also the fear that the greater power of savvy consumers will drive up prices for the less savvy, as banks hike their fees and drop their rates in order to pay for better deals for those they know will leave if they’re not looked after.
You may think this is how it should be: if we want more competition in financial services, that means encouraging customers to see the benefits of switching.
But we should be clear about the consequences. The two-tier system, which benefits the young and technologically confident at the expense of the poor and elderly, will only become more pronounced.