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Ron Delnevo's Blog
Ron Delnevo's Blog
Blogs » Ron Delnevo's Blog

LINK -The TRUE Story, So Far....

The current arguments threatening to undermine the LINK Free-to-Use ATM Network are bringing to a head issues which have not been properly exposed to scrutiny for 20 years.
Time they were.

Until 1998, ATMs in the UK were solely run by banks and building societies. That year, of the total of 25,000 ATMs in the UK, around 19,000 were located at bank branches. 
In essence, banks were telling their customers “We are the bosses here. If you want cash, come to us. We certainly are not going to bring it to you”.
Hard to believe now, but those were the heady days - for banks - when they  almost could do what they liked. They were respected, held in awe and feared in equal measure.
People and most businesses were small; banks were huge and daunting in the extreme.
As far as ATMs and cash were concerned, the company I worked for at the time, Euronet, changed the rules of the game.
In December 1998, Euronet installed the first Independent - NOT operated by a bank or building society - ATM in the UK.
I know; I was there! 

This is a momentous event clearly not properly recognised by LINK, because to this day the statistics on the LINK website claim the first Independent ATM was installed in 1999. 

Of course, banks, who monopolised LINK in 1998, certainly did NOT want Independents running ATMs. Left to themselves, even that long ago, some of the banks couldn’t really be bothered with running ATMs at all. Thousands of their retail and other customers were clamouring for ATMs on their sites but most were simply told “no”. 
Even if a bank did deign to provide an ATM away from their branches, the “lucky” retailer or petrol forecourt was often charged hefty fees for every cash delivery. 
I know; I have seen the contracts!
That first UK Independent ATM, located in a Spar store in Stonecross in Birmingham, broke the mould of banks dictating where ATMs could be located.
And the banks did not like it!
At that time Independent ATM Deployers (IADs) were not even allowed to be members of LINK.
Luckily, for IADs and the British Public, a worthy former Building Society (remember them, the brilliant, public-spirited Mutuals, killed off by ill-advised politicians and self-serving boards?), the Woolwich, decided to sponsor the Independents into the LINK club. 
So, in December 1998, the first IAD ATM, sponsored by the Woolwich, appeared in Birmingham.
Two years later, the story could have ended. Barclays Bank bought the Woolwich and promptly informed the IAD community that it was not prepared to sponsor them onto the LINK Network.
A short diversion:
...Barclays’ decision to terminate sponsorship of IADs may have been a coincidence but, then again, the bank had launched the UK’s first Credit Card - the Barclaycard - in 1967. Barclays were making huge profit from their card business. Why would they want cash to be made more conveniently available to the public by IADs?
Perhaps underlining this point, when Barclays bought the Woolwich, the by-now-PLC former-Building Society had just won a massive contract from the Post Office to potentially operate thousands of ATMs at Crown and Sub Post Offices around the country.
Barclays immediately pulled out of the contract. Not one Woolwich ATM was ever installed at a Post Office.
I know; Euronet had been brought in by The Woolwich to partner with them in the Post Office contract. Under my leadership, after Barclays failed to ratify The Woolwich contract, Euronet went on to sign a contract direct with the Post Office.  This was much to the delight of the then Prime Minister Tony Blair, who personally announced the first rural Post Office ATM installation Euronet carried out to the UK Parliament in Westminster!
... End of diversion. 
Barclays could have killed off the IADs completely by refusing to sponsor them into LINK. However, fortunately, the government of the time had recently received a report from a man named Cruickshank. This report basically ruled that banks in the UK were suppressing fair competition. They were told to stop doing so.
As one signal that they were listening to the criticisms made by Cruickshank, the banks decided that LINK would admit IADs. Just in the nick of time, as Barclays killed off IAD sponsorship...
I will not at this stage going to go into detail in terms of the structure of LINK and all the huge difficulties faced by  IADs over the years, even after they were allowed to join. I will save that for the book I am writing, which will be detailed and leave no skeletons closeted!
It is enough to say at this stage that there has NEVER been an easy time for IADs, including today.
For example .... shortly after IADs were able to join LINK, Barclays announced that they were going to start charging their customers directly for cash withdrawals, if they used another organisation’s ATMs. 
Whether this was a step aimed at simply earning money or just a way of making cash less popular, it is hard to say. Whatever the intention, it stirred up a hornet’s nest for LINK, with the media taking a strong line against such charges for ATM transactions. In particular, the Daily Mail “slaughtered” the ATM Industry for trying to make bank customers pay for access to “their own cash”.
In the end, Barclays backed down and the bank members of LINK did not introduce charges at that time.
However, Barclays’ actions focused  unwelcome media and political attention on IADs, who at that time mostly made a small charge for cash withdrawals at their ATMs. 
Once again, I will go into detail in my book. For now, I will confine myself to noting that some ill-informed and possibly ill-intentioned politicians leapt in to try to undermine IADs. LINK management immediately bowed to, for the most part, unwarranted criticisms. Life was made more difficult for the IADs. Who did that suit, I wonder?
However, the IADs refused to go away.
They had realised that they could run Free-to-Use ATMs more efficiently than the average bank.
So IADs started installing Free-to-Use ATMs the length and breadth of the UK, which was, of course, immensely popular with the British Public. Suddenly, cash was conveniently available, from ATMs sensibly located at local shops, in communities everywhere.
Thus started the problems at LINK that have come to a head in the last 12 months!
LINK Free-to-Use ATMs were not funded by charging ATM users directly. Instead, the banks had worked out a formula, where each would receive a small cost-based fee when one bank’s customer used another bank’s ATM.
This fee is called “interchange”.
When it was only banks operating Free-to-Use ATMs, everything was more-or-less lovely for those banks. Most - around 70% - bank customers used their own Bank’s ATMs, transactions which did not qualify for “interchange”. The remaining 30% or so of ATM transactions more or less balanced out between the banks, so that net payments of interchange were low. 
In other words, with the banks in control and when there were really very few Free-to-Use ATMs to meet the cash needs of the British Public, LINK was very cosy - and cheap - for banks.
However, IADs installing thousands of Free-to-Use ATMs changed the cosy picture for good.
Suddenly, the UK Public were getting the access to cash at ATMs they needed and deserved - and the banks were having to fund this improvement in Customer Service to THEIR customers in the shape of LINK interchange payments to IADs!
Between 2006 and 2016, ten golden years of improvement in ATM Services for the British Public thanks to the IADs, a net 20,000 extra Free-to-Use ATMs were added to the LINK ATM Network.
And more or less all of that net growth was achieved by the IADs!
Some banks did install ATMs away from their branches in that 10 year period but others deinstalled ATMs in even larger numbers. The net negative impact of such off-branch ATM deinstallations, plus massive bank branch closures with the resultant loss of branch ATMs, meant that there was actually a fall in bank ATM numbers over the decade in question.
So when the LINK website proclaims “10 years of improved access to cash”, what it should really state is “10 years of IADs improving access to cash”.
However, such a realistic summary would make uncomfortable reading for the banks which effectively call the tune at LINK.
The harsh reality is that some banks have not faced up to their responsibilities in terms of providing cash access to their customers. 
10 years ago, when the UK Public were using cash for well over 70% of day-to-day payments in the UK, banks should themselves have installed the ATMs needed to meet the demand for cash.
Instead, some of those banks  issued tens of millions of cards giving customers ATM access but didn’t bother to provide the ATMs where their customers could use the cards!
Of course, banks were hoping their customers would use their cards directly to make purchases at shops, because each card use brought the bank a fee from the retailer.
Stubbornly, however, and despite hundreds of millions of pounds being spent by banks  to promote card use, most of the public continued to use cash.

Isn’t genuine Payment Choice a wonderful thing to behold?

The banks then decided that security considerations were getting in the way of a good “story” for cards. Along came “contactless” cards, with no PIN number needed and the banks promising to meet all fraud losses (ultimately  paid for, of course, through higher shop prices, but that fact conveniently doesn’t appear in the contactless card “story”....)
Contactless has been hyped to a massive extent. However, in the year to April 2017, despite 10 years of this hype, the sobering fact for Card “pushers” is that 76% of purchases in the 50,000 UK Convenience Stores were still made using cash. These largely low-ticket purchases should have been the first to switch to contactless - but most of them haven’t.
Damn it! How dare the public resist the hype?!
Meantime, of course, the Bank of England each year flies in the face of the story line that cash is dying out by announcing that there is evermore of it circulating. In the most recent 12 months covered by a Bank of England announcement, the  year-on-year increase of cash in circulation was around 10%.
Do you know any business enjoying 10% growth whose only product is dying?
Thought not!

The inconvenient truth for anti-cash vested interests is that it will not die out naturally. So they have apparently decided that they will have to try to murder it.
Bank branches closing, taking with them their ATMs help in the murder plot. Even more effective, however, would be making 20,000 IAD Free-to-Use ATMs uneconomic and therefore subject to deinstallation.
And that is exactly what slashing LINK ATM interchange would achieve.  
It cannot be allowed to happen. Loud voices must be raised in opposition:
•the Payment Systems Regulator must act to maintain and improve the LINK ATM Network it oversees, with Deposit & Withdrawal functionality for both notes and coins a top priority.
•the Bank of England must intervene to ensure the cash it produces is circulated increasingly conveniently for the public and businesses through an expanding LINK ATM Network;
•the Treasury, acting for the government, must ensure that the interests of British citizens and the British economy are safeguarded by maintaining and improving access to cash at ATMs.
NO DELAY IS ACCEPTABLE. 
TODAY IS THE DAY FOR ACTION.
TOMORROW MAY BE TOO LATE TO SAVE THE PAYMENT CHOICE CURRENTLY ENJOYED BY THE UK PUBLIC.
 

Sunday, 12th November 2017

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