A group of 26 cross-party MPs has signed a letter calling on the Payments System Regulator (PSR) to take action on the interchange fee – allowing for ATMs up and down the country to once again become free to use.
The letter, led by Jamie Stone MP, draws attention to the role the cut in the interchange fee played in the access to cash crisis disproportionately affecting the most vulnerable in society. This decision from LINK - to cut the fee paid by banks to ATM providers for every cash withdrawal - has passed costs usually paid by banks onto consumers, resulting in the lack of free-to-use cash machines seen in many communities today.
The MPs argue that had the interchange fee not been reduced, the ATM industry would have been protected from the lower levels of demand resulting from the pandemic. This would have allowed for communities to continue accessing their cash for free when they most needed it as the financial pressures of the pandemic hit.
The group of MPs are advocating for the PSR to introduce a tiered or zonal approach to interchange fees, which would ensure funding is fairly distributed throughout the UK to protect access to cash in all communities.
They also warn of the problems associated with other proposed alternatives to a properly funded ATM network, highlighting several issues with in-store cashback solutions, which the MPs argue poses serious safety and security concerns due to the need for shops to keep increased volumes of cash on-site.
After signing the letter, Dr Neil Hudson MP for Penrith and The Border commented:
“People in all our communities especially in rural areas need to be able to access their own money freely and conveniently. We need a fairer system for all our constituents. I along with colleagues on both sides of the House urge the Payments System Regulator to act to help make life just a little bit easier for folk in these challenging times.
Letter text below and complete letter attached.
1.
Chris Hemsley
Managing Director
Payment Systems Regulator
12 Endeavour Square
London
E20 1JN
Cc: John Glen MP, Economic Secretary to the Treasury
Cc: Nikhil Rathi, Chief Executive, Financial Conduct Authority
Cc: Kate Fitzgerald, Payment Systems Regulator
Dear Mr Hemsley,
As the PSR and FCA continue to explore the future of the cash landscape alongside HM Treasury’s work on access to cash, I am writing to urge you to act on the interchange fee as part of the solution to protecting access to cash across the UK.
The crisis in access to cash has in large part been caused by the decision of LINK to cut the interchange fee (the fee paid by banks to ATM deployers for every cash withdrawal) and move away from the independent cost study which previously set the fee. This cost study included a volume adjustment mechanism which would have protected the ATM industry as demand changed in the UK as a result of Covid-19.
Action on the interchange fee is a simple and cost-effective solution which would ensure communities, including my constituency, continue to benefit from free cash withdrawals in convenient 24-hour locations.
There is a mass market for cash in the UK in that it is important for everyone, not just the elderly and vulnerable. Pre-Covid-19, around 43 million distinct cards withdrew money from ATMs across the UK every month. Cash is essential for those needing others to shop on their behalf, whether elderly, vulnerable or self-isolating. Cash, and particularly ATMs, are also vital in rural areas which have an older population and where alternative facilities may be inaccessible.
A lack of clear and decisive action on the interchange fee in particular risks the UK’s cash infrastructure disappearing altogether. Alternatives such as cashback without a purchase are welcome options for shops but should not be mandated or seen as a viable replacement for a properly funded ATM network which provides free access to cash.
Increasing the role of cashback in the provision of cash withdrawal facilities would pose significant problems for small retailers, including security concerns around keeping cash on site. ATM crime cost £6.5 million in 2019 and £2.5 million in 2020 to date. Small businesses exist to sell products rather than dispense cash. The latter exposes the business and its employees to personal injury as well as financial losses.
In order to ensure there is no oversupply in city centres, which I know is a concern, proposals for a tiered or zoned interchange fee are welcome. This would ensure that ATM infrastructure funding is distributed fairly throughout the UK and will protect ATMs throughout all communities, despite their population and withdrawal volume levels. This would mean city centre ATMs receive a lower interchange fee, reducing risk of oversupply and encouraging deployment and / or redistribution into tertiary and rural areas where need is highest.
As you consider next steps on protecting access to cash, I would urge you to take action on the interchange fee to ensure a competitive environment for ATM operators and that my constituents continue to be able to access their cash in a fair manner.
Yours sincerely,
Jamie Stone
Diane Abbot
Clive Lewis
Sarah Champion
Marion Fellows
Allan Dorans
Kim Johnson
Peter Aldous
Apsana Begum
Ian Byrne
Ronnie Cowan
Hannah Bardell
Neil Hudson
Angela Crawley
Kate Osborne
Sarah Olney
Virendra Sharma
Tim Farron
Layla Moran
Bell Ribiero-Addy
Patricia Gibson
Alistair Carmichael
Mohammad Yasin
Munira Wilson
Christine Jardine
Wera Hobhouse
Yvonne Fovargue