Cash Machines Close as Contactless Payments Thrive in UK

There has been a rise in the shutdown of automated teller machines (ATMs) across the United Kingdom in the last couple of years. Research analysis done by Which? found that this trend is mostly due to the increase in contactless payments across the country.

Contactless payments are growing in popularity and becoming more ubiquitous for small purchases for which consumers might otherwise use cash. As of July 1, 2018, bank fees paid by a bank for a given withdrawal will be cut from 25 pounds to 24 pounds. The planned cut in fees is making it difficult for the independent operators to thrive and survive, especially in more rural regions of the UK.

In the United Kingdom, there are around 70,000 operating ATMs at the moment, and 97 percent of those are free to use. The withdrawal fee is on track to be cut even further down to 20 pounds. Many independent operators of ATMs at different remote locations, such as in department stores and gas stations, say that the minor cut is enough to make ATMs unprofitable. According to the survey by Which?, the pace at which ATMs are closing has been rising since 2015. Most of the closures are in suburban and rural areas.

Link network has said that having an ATM located about 300 meters from another ATM is causing unnecessary expenses to maintain these machines, as the use of cash is decreasing. The banking industry body, UK Finance, says that debit card payments are overshadowing the use of cash, and that debit cards have emerged as the most popular method of payment in the United Kingdom.

In 2017, use of debit cards increased by 14 percent. The use of cash between 2016 and 2017 dropped 15 percent to just 13.1 billion transactions. On the other hand, there are now over 18,000 free ATMs in the UK. This is a huge gap that has become increasingly difficult to sustain and needs to be addressed collectively and comprehensively to safeguard Link and to find a more tenable solution to cash withdrawal. Link’s primary goal going forward in a changing payments economy is to support rural communities and their access to cash.

One solution is to reduce interchange fees in busy centers, while increasing the same in highly remote areas. Some remain skeptical about solutions proposed by banks. David Clarke, head of advocacy and policy at Positive Money, a non-profit organization, says that the rise in contactless payments is due to the hidden agendas of banks to move consumers away from cash and force the use of debit and credit cards.

Contactless payments have not completely taken over the use of cash, but still have become the preferred method for small transactions, like those involved in transportation and at coffee and sandwich shops. Because of the consumer shift towards tap-and-go methods, banks are trying to move away from having to pay fees for sustaining the vast networks of ATMs across the country.

Since London’s adoption of contactless technology in the underground and transport network, merchants across the country are trying to keep up with the trend. The challenge for merchants has become the quick upgrade to point-of-sale terminals for contactless technology. With a strong consumer push, both banks and merchants are adapting to the universal use of contactless methods. Merchants, banking institutions, and consumer groups will have to cooperate going forward to transition smoothly into an economy that handles the needs of both industry and consumer.