Time to Remove Barriers to Entry in the UK ATM Market

Posted on: 18/08/2019

In an era when many banks feel they must cut their costs by closing branches and ATMs, it is time to finally knock down the barriers to entry which are significantly restricting competition in the UK ATM market.

In the United States, where barriers to entry are effectively non-existent, there are literally hundreds of ATM operators, some of which have less than 50 ATMs in their estates. Such operators often provide a truly local service, confining their activities to one State or even, sometimes, to a big city within a State.

How many such operators do we have in the UK?


The reason is simple; cost.

A recent confidential survey of non-bank ATMs operators in the UK revealed that the minimum annual cost associated with being a member of the UK LINK ATM Network is around £125,000. LINK membership fees themselves are only a relatively small element of the total cost package, but by the time every outgoing is included in the calculation, the figure reaches the £125,000 level.

This is a daunting figure for any new entrant and basically impossible to contemplate for any operator looking to have 50 ATMs or less.

Given the need to replace lost bank ATMs, one would have thought that work would be in progress to reduce the costs faced by new entrants.

In fact, the reverse is true.

I am told that the new 10 year contract members of LINK are expected to accept by September 2019 - next month - will require members to commit to a minimum payment of £100,000 a year for the full term of the contract. In other words, should they wish to leave after 5 years, they would need to find half a million pounds to meet their remaining obligations under the exit provisions.

How many new market entrants, planning to operate only a small number of ATMs, are likely to prepared to make such a commitment, even in the unlikely event that they can afford to do so?


This is a wholly unacceptable position.

The Payment Systems Regulator, which oversees LINK needs to intervene, working with the ATM Network, to remove barriers to entry.

Several complementary steps are needed.

Firstly, LINK membership fees should be waived for the first five years of a new entrants participation in the Network, or until the member operates 500 ATMs, whichever is the sooner.

Secondly, new market entrants should not be required to make any financial commitments related to either ATM numbers or transaction volumes, whether directly to LINK or to any associated organisation.

Thirdly, sponsorship on to the LINK Network should be allowed. This is a scenario where an ATM operator, rather that joining LINK directly, can instead piggy-back on another organisations membership, whether a bank or non-bank member. This was the original way non-bank ATM operators were able to enter the UK market and should be allowed again to facilitate speedy market entry.

Despite the seemingly well-coordinated anti-cash PR campaign, which leads to regular obituaries in the UK media for what remains the world’s favourite payment method, demand for the £ remains strong in the UK.

If access to the cash the UK public continue to want to use is to maintained and, perhaps, even improved, we need to see new ATM operators emerging.

I look to the Payment Systems Regulator to meet its obligations to the UK public by intervening to both demolish barriers to entry and to ensure a viable and affordable path is available for new market entrants, whatever size of ATM estate they might envisage operating.

©2024 Cash Is Cool
Website design by Modern Websites