Future of ATMs

Debate between Simon Hoare and Ged Killen

Thursday 1st March 2018 Commons Chamber

[Simon Hoare (North Dorset) (Con)]

I am delighted to rise to speak to an issue that I am tempted to say affects all constituencies throughout the country: the future of automated teller machines and their provision to our constituents.

By way of introduction, I should say that this debate was triggered by LINK—the body that co-ordinates most of the ATM network and sets the rules for ATM providers —which has proposed and confirmed changes to its interchange fees, following a rather flimsy four-week internal consultation with its bank and ATM-provider members. The core of the proposal is that LINK will reduce its interchange fees by 20% over a four-year period, from 25p to 20p per transaction. The first 5% reduction—from 25p to 23.75p—is set to take place on 1 July this year. Interchange fees will then fall by another 5% on 1 January next year, with a further 5% reduction in fees expected again in January 2020 and again in 2021.

Concerns have been expressed by Members from all parties and by organisations as diverse as Which? and the Federation of Small Businesses. More importantly, because they are key to the network, ATM machine providers—companies such as Cardtronics—have made significant representations to us. This issue is potentially so serious that the Treasury Committee has been hearing evidence on it. In a statement on 31 January, the Chair of that Committee, my right hon. Friend the Member for Loughborough (Nicky Morgan), said:

“Any significant reduction in free access to cash would be an unacceptable outcome. This will be the first major test for the Payment Systems Regulator. They must ensure that customers do not lose out as a result of LINK’s proposals.”

I shall return to the PSR in a moment or two.

LINK’s proposal comes against the backdrop of significant bank closures, an issue that is often seen through the prism of a rural telescope, but which also affects larger market towns, suburban areas and large city centres. The cri de coeur usually goes up from the banks, as they reduce their estate, of the need to use digital banking. That is an easy solution for very many people and indeed it is very popular—I use it myself—but in rural areas where broadband speed is not as fast as it needs to be and mobile telephone signals might not be strong enough to enable people to log on to banking services, our banks have been very much at the heart of communities, socially and commercially. With their closures, access to cash through ATMs becomes even more pivotal. There was the flimsy consultation by LINK of its members, who clearly have the whip hand, but there was precious little, if any, identifiable engagement with or consultation of consumers in our communities. I am happy to stand corrected, but I believe nothing came through to Members of Parliament suggesting what LINK might be doing.

Reliance on ATMs grows. I know that the Treasury and my hon. Friend the Minister, who I welcome to his place and with whom I have discussed this issue, believe that the use of cash is decreasing. I am sure that he will give us the up-to-date statistics on that, as there is a trend in that direction. The death of cash has long been predicted, but has never actually come about. It has declined by about 34% in the past decade or so, but there is still a need for cash. I am tempted to say that, disproportionately, the need is among our older people—65% of my constituents in North Dorset are over the age of 70—and those on low or fixed incomes who find managing their weekly budgets much easier via cash transactions than merely by contactless payments or by using some other form of card.

Access to the cash that ATMs dispense clearly provides for a social and financial inclusion agenda. You do not have to take my word for it, Madam Deputy Speaker. It is amazing when people turn up whom one vaguely knew at university. A friend of mine from university days—yes, I can remember that far back—happens to be the chief cashier at the Bank of England. Victoria Cleland is quoted in The Guardian—I was given this quote, as The Guardian is not the newspaper of choice necessarily in the Hoare household—saying that the predictions of the death of cash are premature and that

“cash is definitely here to stay.”

When the chief cashier herself says

“I personally don’t really use contactless”,

that perhaps says something about the over-reliance of some of our service providers on technology, as they neglect the fact that not all our constituents, including the chief cashier of the Bank of England, feel terribly comfortable using it.

I am very grateful for the submissions that I have received from the Association of Convenience Stores. It does not support the LINK decision. It represents 33,500 convenience stores, and in rural constituencies such as mine where the out-of-town shopping mall and the large superstore is not common, such stores provide not only a retail function but will often host an ATM as well.

[Ged Killen (Rutherglen and Hamilton West) (Lab/Co-op)]

I congratulate the hon. Gentleman on securing this important debate. I know that the turnout today reflects not the importance of the debate, but the weather. Does he share my concerns about the comments of the chief executive of LINK who went on record before Christmas in the Daily Telegraph, saying that cash machines will largely disappear, and completely disappear in rural areas? Is that not an odd comment from the chief executive of LINK, which is charged with a public service remit to protect cash?

[Simon Hoare]

It is not only odd; it is both perverse and totally contrary to the expectations of the regulator and the duties that LINK ascribes to itself. I will come in a moment to the role of the Government, particularly the Treasury, in this issue. There is a real danger of constituents being caught in a pincer movement between competing business and commercial interests. There are duties or expectations of the regulator, but it has no real teeth to deliver. If the hon. Gentleman bears with me, I hope to come to that in a moment or two.

The Association of Convenience Stores does not support LINK’s decision. It has raised a number of issues, including bank closures, saying that

“the withdrawal of ATMs has increased the role that ATM providers and convenience stores play in providing consumers with access to cash.”

Of course, ATMs hosted in convenience stores and other retail outlets also provide benefits to the high street and other shopping parades by providing access to cash to facilitate consumer spending. Wanting, quite properly, local money to be spent locally is one of the major arguments deployed by the Federation of Small Businesses with regard to its concerns.

LINK has suggested that retailers could fill the gaps in the ATM network through cashback services. Again, in theory it is probably right. However, the practice of a one or two-man shop—or, indeed, a one or two-woman shop—in an isolated rural setting holding enough cash not just to deal with transactions, but to hand money to people on a cashback basis totally neglects the impact of the insurance premiums that those retailers would have to incur, often in marginal retail businesses. That is not to mention the security concerns of staff working in those shops at a time when rural policing is not of a high visible profile. It seems a rather dangerous premise on which to base a strategy.

I am very grateful for the support of 41 colleagues from across the country and across this House who wrote to Hannah Nixon, the managing director of the Payment Systems Regulator, who has been both punctilious and courteous in her dealings with me. We outlined our concerns in our letter of 29 January, highlighting the potential disproportionate impact on rural areas, although we did not limit our concerns only to rural areas. Again, I thank Hannah Nixon for her promptness, as she replied on 31 January. Her response gave some comfort, but not enough.

I urge the Treasury Bench to think about these things. I appreciate and understand that we want a light touch when it comes to regulation, but a light touch does not mean contactless. A light touch does not mean that we just pull away and let things evolve as is seen fit. Indeed, a number of concerns have been expressed, particularly by the providers of the machines, in relation to what happened across the pond in the United States. LINK here has predicated its decision to reduce the interchange fee primarily—or certainly in great part—because of changes in the market by other providers, such as Visa. We always used to say that when the United States coughs, 20 years later we will probably get the cold. The race to the bottom in reducing overheads through the interchange fee in the United States has led to a significant reduction in the provision of ATMs and in access to cash, often for the poorest American citizens. Let us learn from that example. Let us be alert to it.

I return to the letter of 31 January from Ms Nixon. Two words cause me some concern. She tells me and the other MPs who signed the letter that the Payment Systems Regulator has made

“clear to LINK what we expect”

and that,

“Promoting the interests of users is one of our statutory objectives”.

I am tempted to say that promoting is good, but protecting—looking out for—would be better; and demanding and ensuring, rather than expecting, would give us more cause for comfort.

Sturminster Newton is a very pretty market town in my constituency that saw its last bank close last year. That has been sad. It has had a huge impact on residents and on businesses within the town. My very good friends Andrew Donaldson and Chris Spackman—excellent town councillors and diligent local public servants—have been trying to fill the gap that this has created. The town does have a couple of ATMs, but their capacity is small in terms of the volume of cash they can hold, and one of them has very poor reliability. They were just on the cusp, with Cardtronics, of delivering a new ATM for the town. We should bear it in mind that when Lloyds had its ATM, it was dispensing £180,000 per week, rising to about £200,000 when big events were going on, such as the annual cheese festival.

Councillor Spackman contacted Cardtronics and was put in touch with its EU corporate director. Very helpfully, it was going to come and deliver a new ATM, but that was pulled, citing

“recent proposed reductions to the Link transaction fees”

which

“had reduced the viability of our ATM making it uneconomic for them”—

that is, Cardtronics. He said that he

“doubted any other operator would be interested in installing an ATM in Sturminster Newton”

and that as a result

“there would be ‘cash deserts’ in rural areas”.

Sturminster Newton is quite a small town of about 4,500 people. However, the rural catchment—I declare an interest as it includes the town that my wife and I look to for service provision—has about 18,000 people. Therefore, 18,000 people in a sparsely populated rural area now have real difficulty in getting hold of cash.

I have tabled a number of parliamentary questions, and I am grateful for the answers that my hon. Friend the Minister has given. I drew particular comfort from a letter I received on 7 February from my hon. Friend the Member for Salisbury (John Glen) in his capacity as Economic Secretary to the Treasury. He says in the third paragraph:

“I know you have an interest in this issue. The Government has always aligned with MPs on the question of continued widespread free access to cash, and made it clear to LINK that while sustainability of the ATM network is important, it must not put this access at risk.”

So the Treasury Committee, consumer organisations such as Which? and the Association of Convenience Stores, very many Members of Parliament, Cardtronics as a representative of the ATM providers, and my hon. Friend the Economic Secretary are drawing together a coalition of interest and concern to ensure access to banking and access to cash through the ATM network. I have sat and listened to, and read, submissions from LINK, Cardtronics, and others. Earlier this week, there was a very useful event upstairs in one of the Committee Rooms where both organisations were able to make presentations, and information has been submitted by the regulator.

I ask the Government to accept this point: while the use of cash is on the decline, its death has been greatly exaggerated. Technology will not always fill the gap, and cash will always provide a very important mainstay in our economic and retail life. Against that backdrop, the regulator clearly has a remit, and LINK has an aspiration. The Minister represents Newark, a constituency that in its size and demographic is probably not that dissimilar from my own, and indeed from that of many other Members. I see that his Parliamentary Private Secretary is my hon. Friend the Member for North Cornwall (Scott Mann), who I have no doubt has similar issues in his constituency.

I encourage the Minister not to take a laid-back approach to this. We must hold people to account and ensure that the regulator has the confidence to be as muscular as possible. The current trend that the regulator and LINK seem to have of retrospective review and analysis of how these things have panned out is not good enough and is not giving comfort to me, as the Member of Parliament for North Dorset, to many colleagues across the House and to our constituents that we are looking out for their interests and seeking to preserve their access to a robust and reliable ATM network.