UK Cash & Cash Machines. Trends in cash payments, cash machine deployment and usage, and other forms of cash acquisition

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UK Cash & Cash Machines

Trends in cash payments, cash machine

deployment and usage, and other forms

of cash acquisition

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The Payments Council is the body with responsibility for ensuring that payment services work

for all those that use them in the UK. This unique role ensures that we listen to a wide range of

stakeholders to drive innovation in payments and implement change so that individuals and

businesses have access to payments for their current and future needs. We are, by nature, a

collaborative body so we work with the financial institutions in the payments industry as well as

listening to the voices of our external stakeholders.

The Cash Services Group acts as a focal point for the provision of strategic direction on

co-operative (non-commercial) issues for cash as a component of the UK money transmission

and payments industry.

Two other bodies contributed to the data within this publication:

The LINK Scheme is the national ATM network that connects virtually all of

the UK’s ATMs. LINK’s role is to provide UK consumers with universal access

to cash in a safe, convenient and rapid manner. LINK is governed by the

35 industry organisations that issue ATM cards and deploy ATMs in the UK.

It celebrated its 25th anniversary in 2012.

The UK Cards Association is the leading trade association for the card

payments industry in the UK. With a membership that includes all major

credit, debit and charge card issuers, and card payment acquirers, the

Association contributes to the development of legislative and regulatory

frameworks; develops industry best practice; safeguards the integrity of

card payments by tackling card fraud; develops industry standards; and

co-ordinates other industry-wide initiatives across matters relating to both

card payments and the provision of credit.

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UK Cash & Cash Machines 2013presents information on how and where we obtain cash for daily use. It also includes forecasts for how cash use will change over the next ten years.

Other publications produced by the Payments Council include UK Payment Statistics, UK Automated Payments, UK Payment Markets, UK Consumer Paymentsand UK Cheques. Another publication, UK Plastic Cards, is produced by The UK Cards Association. For Payments Council membership information please contact membership@paymentscouncil.org.ukor find further information on our website www.paymentscouncil.org.uk

Colleagues working on behalf of the Payments Council will be happy to help if you have any queries regarding this publication.

For card use and cash machine data please contact Information Management:

David Obuwa/Nigel Burt Tel 020 3217 8421/8244

Email inform@paymentscouncil.org.uk

For payment market information please contact Policy and Markets: Andrew MacLachlan

Tel 020 3217 8302

Email pmr@paymentscouncil.org.uk

If you wish to purchase further copies of this publication, please contact:

press@paymentscouncil.org.uk

Trends in cash payments,

cash machine deployment

and usage, and other forms

of cash acquisition

UK CASH

& CASH

MACHINES

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Unless otherwise stated, the source of all data is the Consumer Payments Survey and payment statistics provided by members.

Further information relating to cash machines can be found in UK Payments Statistics.

Acronyms and data sources

The following acronyms are used in this publication:

ATM Automated teller machine – also known as a cash machine BBS Banks and building societies

IADs Independent ATM deployers SME Small or medium-sized enterprise Ownership of cash machines is split between two types of institution:

banks and building societies [BBS] and independents [IADs]. When IADs first entered the market in the late 1990s LINK membership rules required them to be sponsored by an existing (BBS) member. Membership rules were amended in 2000 to admit IADs to membership in their own right. In the early years IADs charged for withdrawals at their machines but they have recently been providing an increasing number of free-to-use machines. To understand the market it is worth knowing not only the distribution of machines by ownership but also how many are free-to-use or pay-to-use, as the pay-to-use category is no longer synonymous with IAD ownership. A significant proportion of machines (70%) are installed in commercial and public locations and it is worth comparing usage patterns between these machines and those at BBS branches.

Key Statistics

2012

• By the end of the year there were 66,134 cash machines in

the UK, an increase of 2.7% (1,765 machines) on 2011.

97.2% of withdrawals and 97.6% of cash withdrawn were

from free-to-use cash machines.

• There were 20,065 pay-to-use machines at the end of 2012,

a decrease of 2.3% on 2011 whilst free-to-use cash machines

increased by 5.1% to 46,069.

• The number of withdrawals at cash machines installed at

off-site locations rose to 1.7 billion whilst withdrawals at

on-site machines fell 2.9%, consistent with the change in

number of cash machines.

• Cash machine withdrawals increased by 1.4% to 2.9 billion

with values of £194 billion, an average of £6,139 per second.

• There were 44 million users of cash machines in 2012, each

of whom withdrew around £360 every month on average in

5.5 withdrawals.

• 72% of cash acquired by individuals was through cash machines.

• There were 20.8 billion cash payments in the UK, representing

54% of all payments.

• 7.2 million adults made all of their day-to-day purchases by

cash, an increase of around 0.7 million compared with 2011.

• 20% of consumer spending, or £267 billion in total, was

by cash.

• In 2012 cash machines were available for 95% of the year.

2.6% of downtime was due to a hardware fault and 1.1% as

a result of there being no cash in the machines.

• During 2012 an average of 1.7% of all notes dispensed across

the industry comprised of £5s, with an average withdrawal

of approximately £200 million per month for this denomination.

• By the end of 2012 over 5,500 cash machines were dispensing

£5 notes, up from 4,800 a year earlier.

• In 2022 it is forecast that cash machines will dispense

£206 billion in 2.6 billion transactions.

• Non-cash payment volumes are projected to overtake cash

in 2015 and cash is forecast to account for around a third of

all payments in 2022.

• In 2022 it is forecast that there will be almost 14.0 billion

cash payments to a total value of £255 billion.

• There were 266 million debit card cashback withdrawals in

2012, an increase of 4%. The value withdrawn was just under

£7 billion.

• The total value of cash acquired for state benefits and wages

in 2012 was £36.8 billion. This was approximately half the

value acquired this way in 2002.

• The number of cheque and passbook withdrawals is forecast

to fall to around 30 million in 2022 – a tenth of the number

in 2002.

• Withdrawals from accounts using counter services and debit

card cashback were worth just over £37 billion in 2012. This

represented 16% of the total amount of cash withdrawn.

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1.1 Spending our cash

The total number of cash payments in 2012 was little changed on 2011, at 20.8 billion transactions, representing 54% of the volume of all payments. Although the shift in shopping from the high street to the internet and increased use of debit cards has cut cash use with some people, others have increased their use of cash. Cash can be the preferred method for people who need to manage their finances very closely and with the falls in real household incomes, the number of people who make all of their day-to-day purchases by cash rose by around 0.7 million last year to 7.2 million adults. Businesses make much less use of cash as a payment method than consumers. Just under half use it to make payments, and this use represented around 1% of all cash payments last year.

Consumer cash spending, at £267 billion in 2012, was also little changed on 2011 and represented 20% of the value of all consumer payments. Over the long term, the value of cash spending has been stable at around £265 billion each year, which represents a continuing decline in real terms once inflation is taken into consideration.

Over the next ten years, the state of the economy will be one influence on the level of cash transactions. A continued squeeze on household budgets will help sustain cash use, with consumers remaining wary of using other payment methods until they are more confident about their income prospects. However, growth in the use of alternative methods could cut cash volumes. There is already a trend away from cash to debit cards. Contactless payments, whether with a card or NFC-enabled mobile phone could make further inroads into cash use at the point-of-sale. In other areas such as person-to-person payments, mobile account-to-account payments will provide easy-to-use and secure alternatives to cash. Overall, it is projected that cash payment volumes will fall from 20.8 billion in 2012 to 13.7 billion in 2022. In value terms, consumer cash spending is forecast to fall from £267 billion in 2012 to £255 billion in ten years’ time. In these projections, cash remains a convenient and very widely-used method, especially for low value payments. In addition, for many people it will continue to meet their needs better than electronic methods due to the tangibility, anonymity and instantaneous transfer of value that using cash provides.

Two notable milestones are that in 2015 cash is expected to account for fewer payments than the total of non-cash payments for the first time, and that debit card volumes will just overtake cash in 2022. Both these forecasts are one year further out than the forecast in UK Cash & Cash Machines 2012, and reflect the sustained demand for cash as a budgeting tool by some consumers during 2012.

1.2 Cash machines

Cash machines are by far the most commonly used way to get cash. The number of people who use cash machines has been growing steadily year by year. There were 44 million users in 2012 of whom over nine in ten withdrew from a cash machine at least once each month. In recent years the number of users have been increasing but at a faster rate than the number of transactions, resulting in a reduction in the average number of withdrawals.

The number of cash machines in the UK increased by 2.7% in 2012, a net increase of 1,765 machines to bring the year-end total to 66,134 cash machines. This makes 2012 the highest end-of-year total seen so far. This follows on from an increase of 2.0% in 2011 to leave the year-end total at 64,369 machines – a net increase of 1,232 machines. Positive growth in the past two years was in contrast to that in the three years preceding 2010 which registered average growth rates of -0.4%, or a net decrease of 843 machines. The decline in these three years coincided with the economic downturn, and was in marked contrast to the period between 2002 and 2007 which recorded average growth rates of 9.8% or a net increase of 23,155 machines.

Long standing trends continued during the year such that the number of free-to-use machines increased to 46,069 and the number of pay-to-use machines decreased to 20,065 representing a 70% to 30% split. The increase in the number of free-to-use machines was driven by the acquisition of some remote BBS cash machines by IAD operators and the straight conversion of many IAD machines from pay-to-use to free-to-use. The number of IAD machines increased by 7.5% to 31,437 in 2012 representing 48% of the total number of cash machines.

Another factor driving the increase in the number of free-to-use machines may be their deployment in expanding sectors in off-site locations. An example of this would be the convenience sector which includes re-franchised petrol stations and mini-supermarket outlets such as Tesco Express, Sainsbury’s Local and M&S Simply Food.

Supermarkets, convenience stores and ‘other retail’ at 44% of the total, is the single most popular category for cash machine deployment with 29,013 machines. This compares with 30% (19,612 machines) for BBS and 13% (8,598 machines) for social and leisure combined.

The number of withdrawals at cash machines in 2012 increased by 1.4% to reach 2.9 billion while the total amount withdrawn was up 1.2% to £194 billion. This represented continued organic growth evident since 2011 following declines in 2009 and 2010.

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The number of withdrawals at IAD owned machines increased by 38% in 2012 to reach 384 million. Corresponding withdrawal values grew by 36% to reach £20.4 billion. This growth was driven by the continuing deployment of additional IAD owned free-to-use cash machines.

The levels of transaction activity at BBS owned machines decreased between 2011 and 2012; there were 2.6 billion withdrawals amounting to £176 billion in 2011; in 2012, there were 2.5 billion withdrawals amounting to £173 billion. This decrease has been driven by a migration of transaction activity towards IAD owned machines.

The total number of on-site withdrawals fell by 2.9% to 1.3 billion and corresponding values decreased by 1.7% to £93 billion, as migration continued away from BBS branch machines. In contrast, the number of off-site withdrawals increased by 5.0% to 1.7 billion with values increasing by 4.0% to £101 billion. The increase in activity at off-site locations was centred in the retail sector.

Since March 2010, cash machine operators have been working to increase the proportion of cash machines that dispense £5 notes. They are working to targets set for all LINK members by the Bank of England which stipulated that £5 notes account for a minimum of 1.2% of the overall value of each member’s cash machine outflows. As a consequence there has been an increase in the amount of £5 notes in circulation. Prior to the project launch at the end of February 2010 there were around £1.25 billion worth of £5s in circulation. As at the end of February 2012 the value of £5 notes in circulation had increased to £1.48 billion. Additionally by the end of 2012, over 5,500 ATMs were dispensing £5s, with a wide geographical spread, compared to just 670 in 2009; and around 1 in every 8 ATMs operated by banks and building societies dispensed £5s.

Over the next 10 years cash machines will continue to be used for a significant majority of transactions. The next generation of adults are likely to prefer them over other channels. Volumes are likely to be steady at about 2.9 billion until around 2016 but they are then expected to begin falling year-on-year to 2022. Volumes are forecast to be 2.6 billion in 2022, representing an average annual decline of 1% across the next ten years. The value of cash machine withdrawals is set to increase modestly and stabilise at around £200 billion.

1.3 Other ways of getting cash

None of the other ways of getting cash are used as widely as cash machines. The second most commonly used way to get cash is debit card cashback from a retailer, for which there were 266 million transactions in 2012. Volumes of counter withdrawals – those made at bank branch counters using cheques, passbooks or cards – are lower still. They represented only 4% of total volumes in 2012. On average these withdrawals tend to be for higher values than from cash machines and they accounted for 13% of all cash acquired by individuals in 2012 or 37 billion.

Still looking at values, the share of cash acquired through wages and state benefits and state pensions paid out in the Post Office to Post Office Card Account holders is around half what it was in 2002. This is partly due to changes to the welfare system but mainly because fewer people are paid this way. However, the total value rose slightly compared to 2011. This was driven by an increase in the value of wages paid in cash; the weak economy has led to increased part-time working and self-employment and cash is a popular way to pay both these groups.

Other ways of getting cash from accounts already hold much smaller shares of the market for cash acquisition but each is forecast to decline further in both number and value over the next 10 years. Reduced demand for cash is one reason for their decline. Debit card cashback volumes will decline slowly at an average of 2% each year. Decline is expected to be faster among bank counter services, as generational preferences take effect. The total number of cash acquisitions from accounts is likely to remain steady at around 3.2 billion transactions until the middle of the decade before declining to 2.9 billion transactions in 2022. Within that total, other ways of getting cash are expected to account for fewer than one in ten by this date. The total value of non-cash machine withdrawals is forecast to decline to around £25 billion, in 2022.

Decline is also expected in the value of cash acquired through wages and state benefits. Most of this is likely to come from state benefits. Fewer people receiving their benefits this way will have some effect, as will Universal Credit, a major change to how government pays the six main working-age means tested benefits, that will be introduced over four years from October 2013. This will likely reduce the number of recipients withdrawing their benefits in cash at post offices because they will have to receive payments to transactional accounts. Some recipients may decide to withdraw cash at bank branches and cash machines instead, and some recipients may reduce their demand for cash to ensure they have enough money to meet commitments that the state used to pay on their behalf, such as housing rents.

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2.1 Overall cash payment volumes and values

For most of the last ten years the number of cash payments fell slowly and steadily year-on-year as consumers and business adopted electronic payment methods. However, for the last three years cash payment volumes have seen little change. Although some factors such as on-going migration to debit cards in retailers and a shift in spending to the internet will have reduced cash use, other factors have increased it. These include more people reverting to cash as their preferred budgeting tool with the sharp squeeze on household incomes during the economic slowdown and expansion in the discount retailer sector, where cash is the dominant payment method. Another factor has been the increase in self-employment, where cash is a more common method for payment of income than for people in permanent jobs. In 2012 consumers and businesses made a total of 20.8 billion cash payments.

Although the number of cash payments may have stabilised over the last few years cash has continued in relative decline as the number of non-cash payments has been rising. In 2012 cash was used for 54% of all payments in the UK, compared with 71% in 2002. Looking just at face-to-face transactions in the retail, travel and entertainment sectors, the share of all payments made by cash has seen a similar decline in percentage point terms. In 2012 67% of these payments were made by cash compared with 84% in 2002.

The total value of cash payments made by individuals has been stable at around £265 billion each year for the last ten years, although this represents a significant decline in real terms once inflation is taken into consideration. Spending by cash at £267 billion represented 20% of the value of all personal payments in 2012; this compares with 30% of spending in 2002.

Chart 2.1

Total number of cash payments

V olume billions 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 30 25 20 15 10 5 0

2.2 Consumers’ use of cash

Consumer use of cash has been falling across all of the main areas in which they make cash payments. The number of payments for financial transactions has seen the largest decline, with volumes last year less than half what they were in 2002. The volume of payments for non-financial regular bills1_{has also fallen significantly. In the other areas volumes have} been falling more slowly and in 2012 were around 80% of 2002 volumes. The vast majority of cash payments made by consumers are in the retail, travel and entertainment sectors. Together, these sectors accounted for nearly nine in ten of all cash payments last year. Within this total there is considerable variation on the proportion of all payments made with each type of merchant by cash. Typically, the lower the average transaction value the higher the proportion of payments made by cash. In newsagents, pubs and clubs most purchases are of low value and over nine in ten of all payments are by cash. At the other end of the scale just over one in five of all payments in electrical goods stores last year was by cash.

Chart 2.2

Consumer cash payment numbers by sector 2002 and 2012

Retail

Travel & entertainment Person-to-person and person-to-business

Non-financial regular bills Financial V olume billions 30 25 20 15 10 5 0 2002 2012 Electrical goods Discount store Clothes shop Supermarkets Cafes/snack bars Convenience stores Off-licence Pub/club Newsagents 0 10 20 30 40 50 60 70 80 90 100 % Chart 2.3

Percentage of all consumer payments in selected merchants made by cash 2012

1 _{Non-financial regular bills are those made for repeat commitments for supply of non-financial goods or services. Examples include payments for contract mobile phones,}

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Some insights into ‘local currencies’2

A number of ‘local currency’ initiatives have emerged over recent years within particular towns and cities. There are differences in operation and terms and conditions of these initiatives, but they are all tailored towards the need of the local economy. These schemes tend to be a collaborative effort involving local government, businesses and residents. Notable examples in the UK include schemes in Bristol, Lewes, Stroud and Brixton.

Local currency schemes generally aim to promote local economic activity by implementing a payment mechanism (often including physical vouchers) that can be used for purchases from local businesses. The concept is that the payment arrangement encourages consumers to purchase goods and services from local businesses that in turn purchase goods and services from local suppliers. Some schemes also have provisions to pay their staff partly with the local currency. The intention is that the scheme creates a ‘positive multiplier’ effect, keeping spending within the local area.

These schemes inevitably raise the question of ‘legal tender’. Legal tender status has a very narrow meaning in relation to the settlement of debt, which is of minimal relevance to most day-to-day transactions. In essence, all legal tender means that if debtors pay in legal tender the exact amount they owe under the terms of a contract, they have good defence in law if they are subsequently sued for non-payment of the debt.

So although payments backed by a local currency scheme are not legal tender, they may be accepted as a means of payment by the mutual agreement of the parties to the transaction. Acceptance is however often restricted to particular geographic areas and in some cases within specified time frames. It is also the case that some currencies cannot be re-converted to Pound Sterling to encourage spending rather than saving.

Local currency schemes often issue paper vouchers that have some similar physical characteristics to official bank notes and more crucially the same unit value of Pound Sterling. However whilst the appearance of some vouchers are superficially similar to official bank notes the legal form of a voucher is different from that of an official bank note. Vouchers typically represent a pre-payment for goods or services to be provided in the future from a specified supplier(s) and cannot be redeemed by consumers for cash. These are different to bank notes and the precise nature of the paper vouchers will typically be governed by the terms and conditions of the scheme.

Finally local currency paper vouchers are not protected by the Financial Services Compensation Scheme (FSCS) even if the local currency scheme is operated by a financial institution, which itself is protected by the FSCS. The legal position of any ‘local currency’ paper voucher holder in the event of administration or insolvency will depend upon exactly how the individual scheme has been set up and operated.

% o f sp en d in g 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 40 35 30 25 20 15 10 5 0 Chart 2.4

Percentage of all consumer spending for retail, travel and entertainment made by cash

When looking in value terms at the proportion of all spending made by cash the picture is quite different. The high levels of cash use for low value payments means that it is less important as a proportion of consumer spending than as a proportion of the number of payments. Cash spending represented less than 30% of total consumer spending in the retail, travel and entertainment sectors in 2012. The sectors most dependent upon cash included newsagents and pubs/clubs, where over 80% of spending last year was in cash, and convenience stores at around 70% of spending. The sectors least dependent upon cash include jewellers and travel agents where less than 10% of spending was by cash in 2012.

Across the retail, travel and entertainment sectors cash has been declining in importance over the long term, primarily due to increased acceptance and use of debit cards and the shift in commerce onto the internet. In 2012 around 28% of consumer spending in these sectors was by cash compared with around 40% in 2002.

Cash remains an important payment method for person-to-person transactions and for payments to smaller businesses such as tradespeople. Although card acceptance has been growing, as has the number of payments being initiated through internet and mobile banking, the total number of person-to-person electronic payments remains small compared to cash. In 2012 cash was used for around 70% of person and person-to-smaller business transactions, a proportion which has changed little for the last five years.

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Membership of motoring organisation Club subscription Cable/satellite TV Utility bills Road tax Nurseries/childcare Rent Christmas clubs 0 5 1015202530354045 50 55 60 65 % Chart 2.5

Percentage of selected non-financial regular bills paid by cash in 20123

0.0 2.0 1.0 3.0 5.0 7.0 4.0 V olume billions < £1 £1 to £5 £5 to £10 £10 to £15 £15 to £20 £20 to £25 £25 to £50 £50 and over 6.0 8.0 Chart 2.6

Consumer cash payments by value band 2012

A dul ts millions 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 12 10 8 6 4 2 0 Cash is less important as a payment method for paying bills for financial

services such as credit card bills and other loans, paying premiums on insurance policies and investing in products such as unit trusts. Typically these transactions are of high value and an increasing share of financial business is conducted online. The proportion of financial payments made by cash is low and has been falling. In 2012 cash was used for 8% of financial payments compared with 14% in 2007.

The proportion of all non-financial regular bills paid by cash is also low and has been falling steadily. Around 10% were paid in cash last year compared with 12% in 2007. The most popular commitments paid by cash are regular savings into Christmas clubs, which may be collected from the home by the person running the club, and nurseries or childcare, where the service provider may be an individual or micro-business. In both cases cash is a very convenient way of making payments to the recipient and may be the only method accepted. At the other end of the spectrum, fewer than one in fifty cable/satellite bills and membership fees for motoring organisations are paid by cash. In the former, payment by Direct Debit is required or strongly incentivised by suppliers and in the latter Direct Debit and plastic cards are the main payment methods used.

Cash payments are predominantly of low value with 56% of cash payments in 2012 under £5. One trend in recent years has been the shift in payments to the higher value bands reflecting inflation and changing price points in retailers. This has been most marked for payments of value less than £1. In 2007 there were an estimated 6.8 cash billion payments of that value, in comparison there were 4.4 billion in 2012.

3 _{Note: Pre-paid electricity or gas meters are not included in these figures.}

2.3 Users of cash

Chart 2.7 Cash-only users

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Virtually all of us use cash for some of our day-to-day purchases and for a significant proportion of the population cash is all that is used. The number of people who used cash for all of their day-to-day purchases stood at around 10 million for a number of years, representing 20% of the adult population. However, this saw a steep fall over the years 2007 to 2011 mainly as a result of wider issuance and uptake of debit cards on basic bank accounts. Over that period the number of debit card holders rose by over 4 million to 46 million people in 2011. The number of cash-only users rose in 2012 to 7.2 million, which may reflect an increased preference for cash amongst some people in the depressed economic environment and more people receiving their income in cash. However, as this is just one year’s data, it will be important to see if this reversal of trend is sustained in 2013. Looking at the sort of people who are cash-only users, cash has a key role in budgeting for income consumers in particular, including both low-paid workers and benefit recipients. They may have a distinct preference for cash budgeting as this best fits their payment needs in balancing tight household finances and making ends meet. Cash provides the tangibility to enable people to know exactly what available funds they have at any one time; it also allows control over spending to be exercised. In addition, electronic payments can be viewed as high risk by some consumers, giving less control over spending and potentially incurring penalty fees and charges if the individual goes inadvertently overdrawn.

A significant proportion of students use only cash for their day-to-day purchases. This may be because they are 16 to 18 year-olds still at school and with limited access or need to use non-cash payment methods. University students living on campus may also have limited needs to use payment methods other than cash.

As you might expect, on average adults in groups where the highest propensity for cash only use tend to make the most cash payments. However, the differences are not stark. This reflects the fact that the adults in groups which are the least dependent upon cash tend to be better off with higher incomes resulting in more disposable income and higher payment volumes overall. They make a lot more non-cash payments than adults in the lower income groups because they tend to have more household and individual commitments. However, they also make significant numbers of cash payments as they will still be making low value transactions such as for travel and entertainment and in convenience shops, fast food stores or newsagents.

Looking after home Retired Student Job seeker Self-employed Part-time employee Full-time employee £50,000 or more £30,000 to £49,999 £20,000 to £29,999 £10,000 to £19,999 Up to £9,999 Female Male Total 0 5 10 15 20 25 30 35 40

% in group making all their day-to-day payments by cash Disabled

Working status

Household income Chart 2.8

Cash-only users by different groups 2012

0 1 2 3 4 5 6 7 8 9 10

Average number of cash payments per week Looking after home

Retired Student Job seeker Self-employed Part-time employee Full-time employee £50,000 or more £30,000 to £49,999 £20,000 to £29,999 £10,000 to £19,999 Up to £9,999 Female Male Total Disabled Working status Household income Chart 2.9

Cash payment volumes per week per adult 2012 8523_C&CM_2013_INTERACTIVE_Layout 1 16/05/2013 16:50 Page 12

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The mix of purposes for which cash is used does not change radically between different groups. One notable difference is that people in the lower income groups (less than £20,000 per annum) and job seekers spend the least on entertainment and leisure and a higher proportion of their cash payments for the basics such as food and drink for home consumption and regular household bills. Payments for travel including petrol, bus and rail tickets and parking, take up a similar proportion of all cash payments for adults across all socio-economic groups.

Looking after home Retired Student Job seeker Self-employed Part-time employee Full-time employee £50,000 or more £30,000 to £49,999 £20,000 to £29,999 £10,000 to £19,999 Up to £9,999 0 10 20 30 40 50 60 70 80 90 100

% of cash payments in sector Female

Male

Food & drink Other goods Travel

Entertainment & Leisure Finance

Other regular bills

Other Disabled Working status Household income Chart 2.10

Cash payments by purpose in different groups 2012 Cash use compared with that of other payment methods by

adults in different socio-economic groups4

Overall cash was used for 58% of payments by consumers last year, compared with 28% by debit or credit card, 11% by automated means such as Direct Debit and 3% by other means including cheques and PayPal.

Beneath these overall figures there is significant variation in the proportion of their payments made by cash with people in different socio-economic groups. As you might expect, those groups with the highest proportion of cash-only users make the highest proportion of their payments by cash at around 70% of payments. For people in the highest income groups and in full-time or part-time employment cash accounts for around half of all of the payments they make.

Proportion of payments made by each method by adults in each age band

Looking after home Retired Student Job seeker Self-employed Part-time employee Full-time employee £50,000 or more £30,000 to £49,999 £20,000 to £29,999 £10,000 to £19,999 Up to £9,999 Female Male 0 10 20 30 40 50 60 70 80 90 100 % of payments by method Disabled Working status Household income

Cash Card Automated Cheque/other

4 _{Further information on socio-economics groups can be found at http://www.nrs.co.uk/lifestyle.html.}

2.4 Business use of cash

Businesses, government and other organisations make cash payments for a number of different purposes. Examples include refunds to customers, payments to suppliers, wages and employee expenses. However, cash is not a popular payment method with businesses due to the costs and risks associated with its use and payment volumes are very low compared with consumer use of cash. Use is most common where businesses receive cash payments from their customers, as using it for their own payments such as payroll and supplies can be an efficient way to recycle those takings. Overall, around half of all businesses make cash payments.

Charities and other voluntary organisations are similar to businesses in their use of cash. Only a minority use cash and for most it is not an important payment method. This is unsurprising; many charities are small organisations with few employees and make relatively few payments. In addition, national charities regulators have strict rules about the handling and use of cash which can make it a costly and inconvenient method for charities to use. It is estimated that businesses, government and other organisations generated around 1% of all cash payments last year.

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Section 3:

Cash machines

3.1 Number, location and availability of

cash machines

3.1.1 Overview

The overall number of cash machines in the UK increased slightly by 2.7% during 2012, a net increase of 1,765 machines to bring the year-end total to 66,134 cash machines. This makes 2012 the highest end-of-year total seen so far.

In the decade to 2012 the growth rates in the deployment of cash machines appeared to follow a cycle. The first phase of the cycle was between 2002 and 2004 when the growth rate gradually increased from 11% to a peak of 17%. It is possible that between 2005 and 2007 the market naturally reached a level of saturation and maturity as growth rates gradually declined from around 7.1% to 5.8%. This is partially explained by a decrease in the number of banks and building society branches. The start of the recession occurred in 2008 which was followed by growth rates of -1.5% and 0.4% in 2009 and 2010 respectively. More positive growth returned in 2011 and 2012 with growth rates of 2.0% and 2.7% respectively.

In numerical terms, between 2007 and 2012 there were 2,154 installations of additional cash machines compared to 23,155 between 2002 and 2007.

3.1.2 Ownership of cash machines

In the decade to 2012 there was a huge overall expansion in the number of IAD cash machines relative to that of BBS. The number of IAD owned cash machines increased by 7.5% to 31,347 in 2012 while the number of BBS owned cash machines decreased by 1.2% to 34,697 in 2012. The majority of this expansion was a result of the acquisition of BBS cash machines by IAD operators. Average annual growth of 51% during 2003 and 2004 took the number of IAD owned cash machines from a relatively low base of 9,508 in 2002 to 21,683 in 2004. This represents more than a two-fold increase and coincides with the strong growth rates observed for the same period in the total number of cash machines. This rate growth however slowed down between 2005 and 2007 to an average of 11% leaving the number of IAD cash machines at 29,290 at the end of 2007. The start of the recession probably accounted for the negative growth rates in 2008 and 2009, which reduced the number of machines to 27,013 by the end of 2009. Positive growth returned in 2010, with a recorded growth rate of 7.5% in 2012, which brought the number of IAD cash machines to 31,437 by the end of 2012.

Compared to the number of IAD owned cash machines, the number of BBS owned cash machines started from a relatively high base of 31,317 in 2002. There was then steady annual growth of around 1.8% until 2010 when the number of BBS cash machines peaked at 36,023. Since 2011 the number of BBS machines have declined by an annual average of 1.9% which reduced the number of BBS owned cash machines to a total of 34,697 at the end of 2012. The reduction over 2011 and 2012 may be explained by a decrease in the number of bank and building society branches. It is evident that the growth rates in the total number of cash machines between 2002 and 2012, has mainly been driven by the increasing number of IAD machines. Consequently the period between 2002 and 2012 saw a shift in the ownership of cash machines. In 2002 the ratio of BBS to IAD cash machines was 77% to 23% which gradually changed to 56%:44% by the end of 2005 – a proportion that stayed relatively unchanged until the end of 2011. In 2012 there was a near even split of 52% to 48%.

% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 18 16 14 12 10 8 6 4 2 0 -2 Chart 3.1

Rate of growth in number of cash machines (based on the number of cash machines at year end)

0 10 20 30 40 50 60 70 IADs BBS T h o u sa n d s 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Chart 3.2

Ownership of cash machines (as at year-end)

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3.1.3 Pay-to-use, free-to-use

Changes to the numbers of free-to-use machines and pay-to-use machines diverged in 2012. The number of free-to-use machines increased by 5.1% in 2012 while the number of pay-to-use machines decreased by 2.3%. Between 2002 and 2012, there was an average annual growth of 4.0% in the number of free-to-use machines, expanding from 31,317 in 2002 to 46,069 in 2012, the highest level seen. The increase in the number of free-to use machines was driven by a number of factors. The most notable factor was the increase in the number and proportion of IAD cash machines that operate as free-to-use. It is also likely the installation of free-to-use machines by an expanding sector like the convenience sector contributed to their increase. An example of this would be where a petrol forecourt is taken over by a large supermarket chain that also operates a convenience outlet. With the increased sales of petrol, food, drinks and snacks compared with petrol sales alone, there are sufficient withdrawals to ensure the profitable operation of a free-to-use cash machine5_{. LINK’s Financial} Inclusion programme has also played a part. This supports universal access to cash by subsidising the provision of free-to-use cash machines in deprived areas. As a result of this programme, 840 new free-to-use ATMs have been installed, helping consumers in over 1,300 target areas. The industry invests an extra £860,000 per year to maintain these machines. There have been two distinct periods of growth in the number of pay-to-use machines between 2002 and 2012 with positive growth between 2002 and 2007 followed by negative growth from 2008 onwards. The period between 2002 and 2004 recorded robust growth, averaging 50%, and saw the number of pay-to-use machines increase from 9,508 to 21,683. Growth rates subsequently averaging 6.5% annually between 2005 and 2007 took the number of pay-to-use machines to a peak of 26,115. Between 2008 and 2012, the number of pay-to-use cash machines declined by an annual average of 5.1% to stand at 20,065 by the end of 2012. The decline in pay-to-use machines was in the main due to the migration to free-to-use machines.

As with the relationship between BBS and IAD owned machines, the growth patterns observed between 2002 and 2012 show a shift between the number of free-to-use and pay-to-use machines. In 2002 the ratio of free-to-use to pay-to-use cash machines was 77% to 23%. The huge increase in the number of pay-to-use machines coupled with the steady rise in the number of free-to-use machines recorded over the next few years shifted this ratio to 60%:40% by the end of 2004 – which remained relatively unchanged until the end of 2008. The decline in the number of pay-to-use machines which started from 2007 along with the continued steady ascent in the number of free-to-use machines translated into a split of 70%:30% by the end of 2012.

5 _{The statistics may need to be interpreted with care with regards to classification. For example, a cash machine located at a petrol forecourt taken over by a supermarket chain}

may be defined as being located in either the convenience or supermarket sector depending on the cash machine deployer.

0 10 20 30 40 50 60 70 Pay-to-use Free-to-use Thousands 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Chart 3.3

Number of free-to-use and pay-to-use cash machines (as at year-end)

3.1.4 Location of cash machines: on-site, off-site

The number of on-site cash machines stood at 19,612 after decreasing by 1.4% in 2012. The decade to 2012 recorded minimal growth in the number of on-site machines, with an average annual growth rate of 0.2% between 2002 and 2012.

In contrast, the number of off-site machines grew by 4.6% in 2012 to stand at 46,522. The growth profile of off-site machines in the decade to 2012 was identical to the growth profile recorded for IAD machines. Average annual growth of 26% took the number of off-site machines from 21,598 in 2002 to 35,123 in 2004. After this, annual growth averaged 8.4% between 2005 and 2007 increasing the number of off-site machines from 39,202 to 44,719. Negative growth was observed during the recession in 2008 and 2009 when annual growth averaged -1.9%. In the three years to 2012 growth averaged 2.6% annually.

Strong growth in the number of off-site machines relative to on-site machines changed the ratio from 53%:47% (off-site:on-site) in 2002 to 70%:30% in 2007. Continued low growth in both the number of on-site and off-site machines meant that this ratio hardly changed in the years to 2012. At 46,522, the number of off-site machines was at its highest level in 2012, more than double the number of on-site machines.

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Table 3.1

Number of off-site site cash machines split by location

Date Total Convenience Supermarket Other Social Leisure Post Motoring Public Services Workplace Mobile

retail offices transport

2007 44,719 14,767 5,914 2,412 7,649 3,716 3,192 3,502 1,740 926 839 62 2008 44,265 13,409 7,800 2,506 7,239 3,662 3,141 3,684 964 928 913 19 2009 43,073 13,057 8,182 2,682 6,561 3,086 3,017 3,629 947 918 891 103 2010 43,513 15,668 6,489 2,834 5,659 3,197 3,061 3,519 936 1,008 977 165 2011 44,486 16,532 6,720 3,095 5,109 3,465 3,077 3,389 918 1,061 953 167 2012 46,522 19,293 6,853 2,867 5,503 3,095 3,113 2,707 809 1,178 988 116 0 10 20 30 40 50 60 70 Off-site On-site Thousands 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Chart 3.4

Number of on-site and off-site cash machines

Thousands 0 5 10 15 20 25 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Off-site pay-to-use On-site free-to-use Off-site free-to-use

Chart 3.5

Number of on-site and off-site cash machines (showing free-to-use and pay-to-use)

Off-site machines can be sub-divided into more distinctive locations. The growth profiles in the number of machines at these off-site locations can differ for a variety of reasons. For example between 2007 and 2012, the number of cash machines in the social and motoring locations fell by 2,146, and 795 respectively. It is likely most of these machines would have been pay-to-use, and were located at pubs, petrol stations and garages. The highest number of off-site machines is to be found in the convenience sector at 19,293. This category had the strongest growth over the past five years and includes newsagents, corner shops, off licences and ‘open-all-hours’ general stores but also include re-franchised petrol stations and mini-supermarket outlets such as Tesco Express, Sainsbury’s Local and M&S Simply Food.

BBS machines predominate in the supermarket sector mainly due to the presence of ‘own label’ cash machines, for example, those owned by The Co-operative Bank and Sainsbury’s Bank. Banks and building societies installed an additional 133 machines in supermarkets during 2012 to bring their total up to 6,853.

Supermarkets and ‘other retail’ equate to 44% of the total and is the single most popular category for cash machine deployment. This concentration has increased steadily from a share of 37% in 2008 and accounted for most of the increase in the number of off-site free-to-use machines. There were 29,013 cash machines at these outlets by the end of 2012, compared with 19,612 at BBS branches. The share taken by social and leisure categories combined to account for 13% (8,598 machines) by the end of 2012, in 2008 this proportion was 17%.

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19,612 29,013 8,598 3,113 3,516 2,282 On-site branch

Supermarkets & other retail Social & leisure

Post office Motoring & transport Services, workplace & mobile Chart 3.6

Premises where cash machines are located (end-2012)

3.1.5 Additional facilities available at cash machines

In addition to cash withdrawals there are a range of other services available at cash machines. Some of these services assist with the maintenance of a customer’s bank account. However some recent innovations have provided options for mobile phone top-ups and charitable donations at cash machines. Mini-statements remain the most widely-available feature, being found at 92% of all BBS machines.

The use of additional facilities has generally fallen each successive year. From 13,308 per machine in 2002 the number of mini-statement requests declined to 8,447 in 2012. This fall in the demand for mini-statements owes to other innovations that have given customers quicker, easier and more convenient methods to access their accounts. For example, the use of telephone and online banking has given customers the ability to access account details via a mobile phone, tablet or computer. Also, customers have the option to print account balances on the withdrawal receipt. There were only 11 cheque book requests per machine during 2012 compared with 60 ten years earlier. The use of the bill payments facility per machine increased slightly from 116 to 121 bucking the downward trend of previous years.

Mobile phone tops ups at cash machines increased steadily to a peak demand in 2007 with an average of over 600 top-ups per machine. However, with falling demand for pay-as-you-go contracts, use of this facility has declined. The average usage per machine fell to 266 in 2012 compared with 372 in 2011.

3.1.6 Availability of cash machines

Cash machines are available, on average for most of the time, 95% – but there are instances when they are unavailable. Data on the availability of cash machines were reported by 28 BBS and IAD owners of cash machines estates that covered 86% of all BBS and IAD machines during 2012. These data indicate the time that machines are available for use based on 24 hours a day and seven days a week and provide information on the cause of any down time, such as out-of-cash, communications failure, hardware fault and journal roll (out of paper). The most common reason for down time was a hardware fault, accounting for 50% of non-availabilities (although this represented only 2.4% of total available time). Out-of-cash accounted for 24% of down time. The requirement for a supervisor to attend the machine accounted for 13% of down time, and communications failures accounted for 9%.

Statement request Cheque-book request Mini statement Inter-account transfer Bill payment Deposit Mobile phone top-ups 0 20 40 60 80 % 100 Chart 3.7

Percentage of BBS cash machines offering additional facilities in 2012

% 0 20 40 60 80 100 Available Har dwar e faul t

Cash out _Supervis or Comm unications Journal r oll Hos t down 2.4% _1.2% _0.6% _0.4% _0.1% _0.0% 94.9% Chart 3.8

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A dul ts millions 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 45 40 35 30 25 20 15 10 5 0

3.2 Cash machine users

Chart 3.9

Cash machine users

The number of people who use cash machines has been growing steadily year-on-year. This has reflected population growth and generational preferences, with cash machines the preferred method of acquiring cash for the vast majority of younger and middle-aged account holders. Access to cash machines has also expanded, with more adults having a current account and more free-to-use machines in convenient locations, including the on-going initiative by LINK members to install machines in deprived areas. In 2012 44 million people, or 86% of adults, withdrew cash from cash machines, including 79%, withdrawing at least once a month. This compares with 73% of adults using cash machines in 2002, including 61% withdrawing at least monthly.

As discussed in section 3.3 the total number of cash withdrawals has changed little in recent years, which means that the average number of withdrawals per user has been falling. In 2012 each user made 66 withdrawals compared with 70 in 2007. One reason for this trend may be the declining importance of cash in relative terms and the increasing acceptance and use of alternatives such as debit cards. The more that people feel they have an alternative to cash available to them the less likely they are to want to keep their cash holdings topped up.

% in group that are users of cash machines cash £50,000 or more £30,000 to £49,999 £20,000 to £29,999 £10,000 to £19,999 Up to £9,999 65+ 55 to 64 45 to 54 35 to 44 25 to 34 16 to 24 Total 20 30 40 50 10 0 60 70 80 90 100 Household income Age Looking after home Retired Student Job seeker Self-employed Part-time employee Full-time employee Disabled Working status Chart 3.10

Cash machine users 2012

The groups in which the smallest proportions of people are cash machine users are older adults, those on the lowest incomes, job seekers and the disabled. With older people this may be due to a continuing preference to use cheques or passbooks, as discussed in section 4.3, or receipt of state pensions into a Post Office Card Account which meets all of their needs for cash. With people on the lowest incomes, including those in receipt of state benefits, direct receipt of those benefits into a Post Office Card Account may be a factor as might direct receipt of cash in wages. A further influence with the disabled is that individuals who are housebound or have serious mobility or dexterity issues cannot themselves use cash machines. By far the most common way for people to access cash from cash machines is to do so once per week as part of their regular working or shopping arrangements. Over four in ten cash machine users have this regular withdrawal pattern. Another 22% of users withdraw more frequently, with around 4% of predominantly young people using cash machines every day. Around 7% of users make withdrawals from cash machines infrequently, less often than once per month.

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Analysis of average transaction activity per machine6_{reveals the stability} of the industry since 2007. The average number of withdrawals per machine was 44,677 in 2012, slightly below a figure of 45,082 recorded in 2011. The average total value withdrawn per machine in 2012 was approximately £3.0 million, unchanged from 2011.

Distinctive factors drove the decrease in transaction activity at cash machines in 2009 and 2010. In 2009 transactional activity fell following a period of sustained growth since the turn of the millennium, which was a reflection of a maturing market that was moving into a phase of consolidation. The decline in 2010 was driven in part by depressed consumer spending during the year. Meanwhile growth in 2011 was principally driven by the increase in the number of off-site free-to-use machines, a dynamic that continued into 2012.

0 5 10 15 20 25 30 35 40 45 % of cash machine users with frequency of use

Less frequently Once a month Once a fortnight Once a week Several times a week

Chart 3.11

Cash machine users by frequency 2012

Total number of withdrawals Total value of withdrawals Number of ATMs (annual average)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 % 18 16 14 12 10 8 6 4 2 0 -2 -4 Chart 3.12

Number of cash machine and cash machine withdrawals: growth rates

Number of withdrawals Value of withdrawals

Number o f withdr aw als thousands V alue o f withdr aw als £ millions 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 10 20 30 40 50 60 70 80 90 100 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 Chart 3.13

Per machine averages

3.3 Cash machine withdrawals

3.3.1 Withdrawals at cash machines: market overview

Following two years of negative growth in 2009 and 2010, the return to positive growth in transaction activity at cash machines in 2011 continued into 2012. There were 2.9 billion withdrawals representing an increase of 1.4% compared to 2011. The total amount withdrawn was up 1.2% to £194 billion with an average transaction value of £66.41. This represents a fall from a figure of £66.57 recorded in 2011, a possible reflection of an increase in the number of lower denomination bank notes, in particular the £5 (see section 6.2.4 for more details).

Continued growth in cash withdrawals interrupts a declining long term trend in cash use but it is too soon to say if this represents a turning point. This recent growth has been driven by a number of factors. The main factor could be a continuing preference to use cash for lower value transactions, most likely in more urbanised areas where there is ease of access to cash. Other contributory factors could be a continuing preference to use cash as a budgeting tool in the current prevailing uncertain economic climate, and a drive by some major supermarkets to re-direct cash acquisition from their tills to cash machines. It is also the case there is an on-going migration from other cash acquisition methods and channels – such as the Post Office Card Account, cheques and passbooks – towards cash machines. This is being driven by a number of factors including generational preferences and a decline in the receipt of cash in wages and state benefits.

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3.3.2Cash machine withdrawals: BBS machines

The levels of transaction activity at BBS-owned machines decreased between 2011 and 2012; there were 2.6 billion withdrawals amounting to £176 billion in 2011. In 2012 there were 2.5 billion withdrawals amounting to £173 billion. This decrease has mainly been driven by migration of transaction activity towards IAD owned machines, which stems from two factors; acquisition of some remote BBS estates by IAD operators; and the increasing availability of free-to-use machines deployed by IADs.

3.3.3 Cash machine withdrawals: IAD machines

The number of withdrawals at IAD owned machines increased by 38% in 2012 to reach 384 million. Corresponding withdrawal values grew by 36% to reach £20.4 billion. These increases were driven by strong growth in the number of free-to-use cash machines in 2012. This robust growth stems from the deployment of additional IAD owned free-to-use cash machines, with an additional 2,667 machines deployed during the year bringing the total number to 11,378.

As a result, withdrawal volumes at IAD free-to-use machines increased by 55% to 303 million during 2012, which represented 79% of total transaction volumes at IAD owned machines. Corresponding values increased by 51% to £15.8 billion, and accounted for 77% of total transaction values at IAD owned machines. The average daily use at these cash machines increased from 62 withdrawals in 2011 to 73 in 2012.

Transaction volumes at BBS branch machines decreased by 41 million to 1.2 billion, while corresponding values decreased by £1.8 billion to £91.7 billion. Transaction volumes at BBS remote machines amounted to 1.3 billion representing a decrease of 24 million from 2011. Corresponding values decreased by £1.3 billion to £81.5 billion. Despite this overall slowdown, average withdrawal amounts were broadly unchanged at each location with branch BBS machines showing an average of £74 compared to £64 at remote BBS machines. These averages have held steady over the last four years, with the likely implication being a preference to withdraw larger sums from machines located at branches perhaps out of habit or a perceived sense of security.

During 2012 each BBS machine was used on average to make 72,513 withdrawals – a daily average of 200 transactions. On a per machine basis, approximately £5.0 million was withdrawn per annum, an average of £13,677 per day. 2003 2002 2004 2005 2006 2007 2008 2009 2010 6 5 4 3 2 1 0 Number o f withdr aw als thousands V alue o f withdr aw als £ millions 120 100 80 60 40 20 0 2011 2012 Number of withdrawals Value of withdrawals

Chart 3.14

Per BBS machine averages

Viewed on a per machine basis, transactions at all IAD-owned machines increased strongly in percentage terms during 2012, growing by 29% to reach an average of 12,644 withdrawals per machine per annum, equivalent to 33 times per day, compared with an average of 26 withdrawals per day in 2011. In value terms the total withdrawal per machine increased by 26% to reach just under £0.7 million, an average of £1,777 per day.

2003 2002 2004 2005 2006 2007 2008 2009 2010 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Number o f withdr aw als thousands V alue o f withdr aw als £ millions 14 12 10 8 6 4 2 0 2011 2012 Number of withdrawals Value of withdrawals

Chart 3.15

Per IAD machine averages 8523_C&CM_2013_INTERACTIVE_Layout 1 16/05/2013 16:50 Page 20

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3.3.4Cash machine withdrawals: on-site and off-site machines

Over a number of years there has been a migration of transaction activity from on-site to off-site machines. In spite of an increase in the overall number of withdrawals during 2012, the total number of on-site withdrawals fell by 2.9% to 1.3 billion. This is the seventh consecutive annual fall and is continuing evidence of the migration away from BBS branch machines in particular. In contrast the number of off-site withdrawals increased by 5.0% to 1.7 billion, continuing an upward trend that began in 2006. In value terms, transactions at on-site machines decreased by 1.7% to £92.6 billion while those at off-site machines increased by 4.0% to £101 billion. The average transaction values at on-site machines increased slightly from £73 to £74 while those at off-site machines decreased from £62 to £61.

The increase in transaction activity at off-site cash machines was centred at retail premises. The total number of machines at these locations, which include convenience stores, supermarkets and other retail outlets continued to increase in 2012. An increasing number of these cash machines are ‘merchant – fill’ machines, and it is estimated as much as 30% of cash from these machines is recycled locally. See section 6.2.3 for more details on local recycling. Some ‘merchant – fill’ machines are owned and re-stocked by retailers using cash from their tills. At end-2012 there were approximately 7,700 ‘merchant – fill’ machines in operation. During 2012 the number of withdrawals at off-site machines increased by 79 million to a figure of 1,657 million – with a split of 1,283 million and 374 million for BBS and IAD machines respectively. This total represented 57% of all transaction volumes up from 55% in 2011. This rise was attributable to an increase of 103 million transactions at IAD owned machines, offset by a decrease of 24 million at BBS owned machines. In contrast, the number of withdrawals at on-site machines decreased by 37 million to a figure of 1,258 million – the split was an increase of 3 million at IAD owned machines offset by a decrease of 41 million at BBS owned machines. BBS off-site 1,283 million IAD off-site 374 million BBS on-site 1,248 million Chart 3.16

Number of withdrawals at cash machines by ownership and location 2012

BBS off-site 1,308 million IAD off-site 271 million BBS on-site 1,289 million Chart 3.17

Number of withdrawals at cash machines by ownership and location 2011 The number of withdrawals from IAD machines in on-site locations increased from 7.0 million in 2011 to 10.0 million in 2012 – this is too small to show in the chart.

The number of withdrawals from IAD machines in on-site locations increased from 2.5 million in 2010 to 7.0 million in 2011 – this is too small to show in the chart.

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Free-to-use 2,791 million (97%) Pay-to-use 83 million (3%) Chart 3.19

Number of withdrawals at free-to-use and pay-to-use cash machines 2011 (millions)

UK-issued debit UK-issued credit & charge

UK-issued ATM-only Foreign-issued % 0 20 40 60 80 100 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Chart 3.20

Percentage of withdrawals by card type 3.3.6Card usage in cash machines

UK-issued debit cards accounted for 89% of cash machine withdrawals during 2012, one percentage point above the figure in 2011. There were 2.5 billion debit card transactions amounting to £172 billion, an average withdrawal of £66.

The next most commonly used card for withdrawals was the ATM-only card; these cards were used to make 175 million withdrawals representing 6% of all withdrawals in 2012. Although the number of ATM-only cards have been declining over the past ten years, there remain approximately 17 million in issue – 10% of the total number of UK-issued cards that can be used in cash machines. Some basic bank account holders have ATM-only cards, as might adults with certain savings accounts. The total value of withdrawals using these ATM-only cards amounted to just over £14 billion. The Payments Council recently conducted research on access to cash which covered issues impacting consumers with basic bank accounts. This is covered in more detail in section 6.2.1.

The use of credit and charge cards using UK and foreign issued cards to make withdrawals from cash machines fell slightly to 0.9% of the total in 2012. High interest charges on cash advances using credit cards, relative to other forms of borrowing, dis-incentivises the use of this service. Cash advances continued to be used less frequently in 2012, with only 31 million withdrawals amounting to £3.9 billion. In 2011 there were 33 million withdrawals amounting to £4.1 billion.

The remaining category of card use at cash machines embraces all other cards, and this relates principally to cards issued outside the United Kingdom such as those that are used by tourists and business visitors. The proportion of withdrawals using these cards increased by one percentage point for the second year running to a figure of 4%. It is difficult to ascertain how much of the increase in 2012 can be attributed to overseas visitors attending The 2012 Olympic Games. The industry had contingencies in place for potential surges in demand for cash at the Olympic ‘hot spots’. See section 6.2.2 for more details.

Free-to-use 2,834 million (97%) Pay-to-use 81 million (3%) Chart 3.18

Number of withdrawals at free-to-use and pay-to-use cash machines 2012 (millions)

3.3.5Cash withdrawals at pay-to use machines

In contrast to the greater usage of free-to-use machines, visits to pay-to-use machines declined by 2.7% during 2012 with the number of withdrawals falling to 81 million, from 83 million in 2011. Corresponding values decreased by 0.4% to remain at a rounded total of £4.6 billion. Over the whole year pay-to-use withdrawals amounted to 2.8% of the total number of withdrawals and 2.4% of the total value, broadly unchanged on 2011. Each pay-to-use machine was used on average 11 times a day. The average value of a pay-to-use withdrawal increased from £56 to £57 (excluding the fee).

UK Cash & Cash Machines. Trends in cash payments, cash machine deployment and usage, and other forms of cash acquisition