Banks are curtailing “cash services.” But why?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In Australia, banks are reducing ATMs by about 8% a year. In the UK, ATMs — or cashpoint machines, as they’re termed locally — are disappearing at a rate of around 300 per month, leaving consumers in rural areas struggling to access cash, according to a new report by the consumers’ association, Which? The rate of closures has increased sixfold in the period from November 2017 to April this year from a steady pace of 50 per month since 2015.
Banks in Spain have closed around 40% of their branches over the past ten years, on the back of unprecedented industry consolidation and cost cutting. In Barcelona, there are now less than half the number of branches there were in 2008. But it’s in small towns and villages where the impact is being felt most keenly. According to new research, by 2016 as many as 4,114 municipalities — the equivalent of 50.7% of all urban settlements — had no bank branches at all.
Banks in Spain are are also shutting down many of their ATMs. In 2017, the biggest lenders withdrew over 1,100 cash machines — around 3% of the national total. BBVA, Spain’s second biggest lender mothballed 192 ATMs (2.9% of its total stock) last year; Bankia, 301 (4.8%); Caixabank, 47 (0.5%), and Banco Sabadell 541 cash machines, the equivalent of 15% of its total stock.
This is all happening at a time when banks in Spain are making it more and more difficult to access cash from the branches that remain open. As we previously reported, Spain’s third largest lender, CaixaBank, last year launched a pilot project in Madrid aimed at limiting cash services in their branches to less than three hours a day, from 8:15 am to 11 am.
It’s all part of a broad trend. Bank branches are increasingly becoming so-called “customer advisory points,” where the primary role of branch staff is to sell customers a myriad financial products, many of them costly and/or risky, while curtailing the cash services they offer customers.
Spain’s fourth largest lender, part state-owned Bankia, went so far as to remove all cash services from select branches (including my local branch), forcing customers to travel further afield to another branch that still offers cash services, or withdraw or deposit cash at the ATM. But those, too, are becoming increasingly scarce.
The accelerating disappearance of ATMs follows an unprecedented wave of branch closures as banks abandon towns and villages where they can’t make a large enough profit. But this is not just about saving money; it’s about trying to force a dramatic change in customer habits. The more difficult banks make it for their customers to use cash, the more likely those customers are to turn to alternatives, such as contactless cards and mobile money platforms.
There are fears that the cashpoint cull could accelerate further in the coming months as a result of industry pressures. In July the U.K.’s biggest ATM network, LINK, began incrementally cutting the interchange fee for withdrawals from 25 pence down to 20 pence. Europe’s ATM Industry Association warns that the move will prompt independent ATM operators to shutter around 20% of LINK’s fleet of 55,000 free-to-use ATMS, making life even more difficult for the estimated 3 million Brits who depend on cash for almost all of their day-to-day payments.
Harry Rose, of Which?, said:
“These cuts could see millions of people who rely on cash in their daily lives struggling through these closures — with severe consequences for many communities and businesses. The impact is already clear — with machines closing at a frightening pace.”
LINK defends the move by arguing that its own data on ATM usage reveals a drop in cash use. But others contend that cash usage in the U.K. remains more prevalent than LINK claims, citing statistics from the 2017 Association of Convenience Stores report which show that between April 2016 and April 2017 76% of transactions in 55,000 convenience stores across the country were still made using cash.
The ATM Industry Association in Europe lays much of the blame for LINK’s recent move on the major banks that LINK represents, which want to cut service costs and boost their profits by encouraging the use of alternative payment methods.
“The banks want to drive people to use non-cash payments,” Ron Delnevo, executive director for the ATM Industry Association in Europe, said. “This is because the only way they can cut costs is by cutting services, closing branches, taking out ATMs, and so reducing the amount they pay through LINK. And they’re doing that very fast. Last year, the five big banks took out 2,000 ATMs at their branches and elsewhere.”
The UK may be one of the world’s most cashless economies, pipped to the post only by Canada and Sweden, but its heavy dependence on contactless cards and other forms of digital payments means it is acutely vulnerable to system failure, as was amply shown by a recent outage of Visa payments across Western Europe. The UK was particularly hard hit since Visa’s payment systems account for a staggering £1 in every £3 of all retail spending.
In the wake of the outage, as well as an IT meltdown at mid-sized lender TSB that left millions of customers locked out of their online accounts, people in the UK are apparently stashing more cash at home, according to a new survey by GoCompare Home Insurance. A quarter of the survey’s respondents said they now keep more cash in their house in case similar payment system failures happen again.
The irony is that while many British consumers may have rediscovered the benefits of having some cash on hand following the dramatic events of this summer, actually getting hold of the stuff is likely to get a lot more difficult in the future as more and more branches and ATMs are shuttered. The same goes for Spain, Australia and a host of other countries. By Don Quijones.
People view paying in cash “as a fundamental freedom, which should not be disproportionately restricted.” Read… The EU Backs Off its War on Cash. Here’s Why
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