Future of ATMs

Robert Jenrick Excerpts

Thursday 1st March 2018 Commons Chamber

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

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.

[Ged Killen]

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 it not the case that many machines may already have closed after the event?

[Robert Jenrick]

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.

[Simon Hoare]

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.

[Robert Jenrick]

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.