Money costs more when you’re poor. That’s often the case when transferring money abroad, getting a loan, or opening a bank account. In the UK, it can even extend to withdrawing cash from an ATM.
More than 80% of cash machines in the UK are free to use. But if you are poor, no matter where you live in the country, the chances are higher that a machine in your area will charge a fee, according to Link ATM network and parliamentary constituency data compiled by Quartz. This discrepancy is increasingly important as the number of cash machines shrinks across the country.
“It is a simple fact that it does cost money to maintain an extensive branch network and access to cash—and those unit costs will continue to rise,” Mick McAteer, co-director of the Financial Inclusion Centre, a not-for-profit policy group, said in an email. “But, if we leave it to market forces, we will see more people being denied access to affordable banking services.”
Share of ATMs with fees in average constituency, by income level
According to Link, people with incomes of less than £10,000 a year are much more likely to primarily use cash than people with higher incomes, and likewise cash machines tend to be concentrated in poorer neighborhoods. The areas where lower-income Brits live may have plenty of free ATMS, even though the share of pay-to-use machines is higher than in affluent areas.
But that’s not usually the case in poorer areas that don’t have a lot of ATMs (parliamentary constituencies with fewer than 90 machines, which is a little over half of those constituencies). People in these places are much more likely to get stuck with a cash machine that charges fees, compared with people in richer areas with the same amount of ATMs.
There’s no indication that Link, a not-for-profit company that facilitates access to cash nationwide, has ill intentions toward the less affluent, and the same goes for the ATM operators, banks, and building societies that are part of the country’s network of more than 60,000 cash machines. Link says it has had a financial inclusion program since 2006, which subsidizes access to more than 1,800 communities that previously lacked fee-free ATMs.
“The number of charging machines is of less importance than whether there are enough free machines available,” a Link spokesperson said in an email. “People don’t like using charging machines—less than 3% of cash withdrawals incur a fee—but it’s important people continue to have access in the first place.”
The UK’s concentration of fee-charging ATMs underscores how difficult it can be to balance commercial interests with the needs of broader society. Riskier, poorer populations can be more expensive for financial companies to serve. Left alone to market forces, financial services can be regressive, costing more for the people who can least afford them.
“It all stems from the fact that we don’t yet fully treat banking as a utility,” said McAteer, who was previously on the board of the UK’s Financial Conduct Authority (FCA). “If it was treated as a utility function then we would use a different approach to regulation based on social policy obligations rather than just to address market failures.”
That’s why McAteer thinks the FCA should have a statutory financial-inclusion objective, especially as digital banking and card payments, which the poor and other groups may lack access to, replace the brick-and-mortar infrastructure of traditional banks. “More generally, we need a plan to manage any transition to fully tech-based banking,” he said.
For its part, Link has taken steps to shore up the free-to-use network of ATMs. Starting last month, the network boosted its payment for operators of non-fee cash machines if they are one kilometer or more from the nearest other free ATM. Brits can also get free cash withdrawals from any post office. And consumers can look online with a smartphone app to find the nearest free ATM, assuming they have internet access and a smartphone.
Britain’s ATM network is under increasing strain as card payments rise and cash usage declines, putting pressure on the network’s payment model. It has also been squeezed by bank branch closures, which often result in bank ATMs shuttering alongside branches. The system peaked at more than 70,000 cash machines in 2015, falling to 63,200 last year. Link says ATM usage is declining annually by 6%.
As payments go digital, ATMs are becoming less profitable, and free-to-use cash machines are converting to fee-based machines at a quickening pace. There were about 52,000 free cash machines in the UK at the start of the year, and about 1,700 of them became pay-to-use machines by the end of March, according to Which?, a consumer association.
ATMs are declining in part because of declining cash use, and in part because of the way they are funded. Link, which is funded by its bank members, has reduced the interchange it pays to ATM operators for cash withdrawals to 22.5p, from 25p, according to Which?. (The cut was supposed to be even deeper, but was reduced after public outcry.) If those payments aren’t enough to keep the ATM afloat, the operator can switch it over to a fee-based model.
Link has said it’s reducing its interchange fee to help redistribute Britain’s ATM network, as urban areas tend to be crowded with cash machines, while rural places suffer from a lack of them. The network is also likely responding to pressure from Visa; the card payment company has offered a competing system of interchange fees that would be even cheaper for banks.
This month, the UK government announced a new committee to protect the public’s access to cash. The group will have oversight of the country’s entire cash system. “Free-to-use cash machines are disappearing at an alarming rate, which could hit the most vulnerable in our society the hardest,” said Treasury Committee chair Nicky Morgan. “Any significant reduction in access to cash is unacceptable.”