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

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

2 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 212. 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. 2 Cash & Cash Machines 13

3 UK CASH & CASH MACHINES Trends in cash payments, cash machine deployment and usage, and other forms of cash acquisition UK Cash & Cash Machines 213 presents 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 Payments and UK Cheques. Another publication, UK Plastic Cards, is produced by The UK Cards Association. For Payments Council membership information please contact or find further information on our website 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 /8244 inform@paymentscouncil.org.uk For payment market information please contact Policy and Markets: Andrew MacLachlan Tel pmr@paymentscouncil.org.uk If you wish to purchase further copies of this publication, please contact: press@paymentscouncil.org.uk UK Cash & Cash Machines 213 3

4 Contents Key Statistics Section I Overview Spending our cash Cash machines Other ways of getting cash 8 Section 2 Spending our cash Overall cash payment volumes and values Consumers use of cash Users of cash Business use of cash 13 Section 3 Cash machines Number, location and availability of cash machines Cash machine users Cash machine withdrawals Geographical distribution 24 Section 4 Other ways of getting cash Cashback Other card withdrawals from BBS accounts Passbooks and cheques Other sources of cash 29 Section 5 International comparisons Number of cash machines Use of cash machines 31 Section 6 Industry Developments LINK The Payments Council 33 Section 7 Forecasts Spending our cash Getting our cash 38 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 199s LINK membership rules required them to be sponsored by an existing (BBS) member. Membership rules were amended in 2 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 (7%) are installed in commercial and public locations and it is worth comparing usage patterns between these machines and those at BBS branches. 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 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. 4 UK Cash & Cash Machines 213

5 Charts 2.1 Total number of cash payments Consumer cash payment numbers by sector 22 and Percentage of all consumer payments in selected merchants made by cash Percentage of all consumer spending for retail, travel and entertainment made by cash Percentage of selected non-financial regular bills paid by cash in Consumer cash payments by value band Cash-only users Cash-only users by different groups Cash payment volumes per week per adult Cash payments by purpose in different groups Rate of growth in number of cash machines (based on the average number of cash machines deployed per year) Ownership of cash machines (as at each end-year) Number of free-to-use and pay-to-use cash machines (as at year-end) Number of on-site and off-site cash machines Number of on-site and off-site cash machines (showing free-to-use and pay-to-use) Premises where cash machines are located (end-212) Percentage of BBS cash machines offering additional facilities in Availability of cash machines Cash machine users Cash machine users Cash machine users by frequency Number of cash machine and cash machine withdrawals: growth rates Per machine averages Per BBS machine averages Per IAD machine averages Number of withdrawals at cash machines by ownership and location Number of withdrawals at cash machines by ownership and location Number of withdrawals at free-to-use and pay-to-use cash machines 212 (millions) Number of withdrawals at free-to-use and pay-to-use cash machines 211 (millions) Percentage of withdrawals by card type Number of withdrawals: on-us, not-on-us Value of withdrawals: on-us, not-on-us Average value of withdrawals: on-us, not-on-us Cashback volumes and values Proportion of adults in each group who use debit card cashback at least once per month Cash withdrawn by passbook or cheque Cash acquired in state benefits or pensions and wages Number of cash machines per million inhabitants (Western Europe, year-end) Number of cash machines per million inhabitants (BRIC countries compared to United Kingdom, year-end) Number of cash machine withdrawals per adult 211 (Western Europe) Number of cash machine withdrawals per adult 211 (BRIC countries compared to United Kingdom) Value of cash machine withdrawals per adult 211 (sterling equivalent) (Western Europe) Value of cash machine withdrawals per adult 211 (sterling equivalent) (BRIC Countries compared to United Kingdom) Satisfaction with each channel by those who use them at least once each month Denominational mix of notes (by value) dispensed from cash machines Total monthly values of 5 notes dispensed in 211 and Cash payment volumes and values Cash acquisition volumes from bank and building society accounts by channel 38 Tables 3.1 Number of off-site site cash machines split by location Cash machine densities in selected major conurbations in Great Britain Maps 1 Geographical distribution of cash machines within the UK December Geographical distribution of the average value of cash withdrawals ( ) within the UK October Appendices A: Coin circulation in the UK 39 B: Note circulation in the UK 41 C: Key statistics 212 and D: Number of ATMs in the UK by owner institution and location D: Number of ATMs: Summary 45 D: ATM withdrawals 46 Boxes Some insights into 'local currencies' 1 Cash use compared with that of other payment methods by adults in different socio-economic groups 13 Demand, supply and distribution of notes 23 Estimated value and number of coins in circulation as at 31 March UK Cash & Cash Machines 213 5

6 Key Statistics 212 By the end of the year there were 66,134 cash machines in the UK, an increase of 2.7% (1,765 machines) on % of withdrawals and 97.6% of cash withdrawn were from free-to-use cash machines. There were 2,65 pay-to-use machines at the end of 212, a decrease of 2.3% on 211 whilst free-to-use cash machines increased by 5.1% to 46,69. 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 212, each of whom withdrew around 36 every month on average in 5.5 withdrawals. 72% of cash acquired by individuals was through cash machines. There were 2.8 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.7 million compared with % of consumer spending, or 267 billion in total, was by cash. In 212 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 212 an average of 1.7% of all notes dispensed across the industry comprised of 5s, with an average withdrawal of approximately 2 million per month for this denomination. By the end of 212 over 5,5 cash machines were dispensing 5 notes, up from 4,8 a year earlier. In 222 it is forecast that cash machines will dispense 26 billion in 2.6 billion transactions. Non-cash payment volumes are projected to overtake cash in 215 and cash is forecast to account for around a third of all payments in 222. In 222 it is forecast that there will be almost 14. billion cash payments to a total value of 255 billion. There were 266 million debit card cashback withdrawals in 212, an increase of 4%. The value withdrawn was just under 7 billion. The total value of cash acquired for state benefits and wages in 212 was 36.8 billion. This was approximately half the value acquired this way in 22. The number of cheque and passbook withdrawals is forecast to fall to around 3 million in 222 a tenth of the number in 22. Withdrawals from accounts using counter services and debit card cashback were worth just over 37 billion in 212. This represented 16% of the total amount of cash withdrawn. 6 UK Cash & Cash Machines 213

7 Section 1: Overview 1.1 Spending our cash The total number of cash payments in 212 was little changed on 211, at 2.8 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.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 212, was also little changed on 211 and represented 2% 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 2.8 billion in 212 to 13.7 billion in 222. In value terms, consumer cash spending is forecast to fall from 267 billion in 212 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 215 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 222. Both these forecasts are one year further out than the forecast in UK Cash & Cash Machines 212, and reflect the sustained demand for cash as a budgeting tool by some consumers during 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 212 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 212, a net increase of 1,765 machines to bring the year-end total to 66,134 cash machines. This makes 212 the highest end-of-year total seen so far. This follows on from an increase of 2.% in 211 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 21 which registered average growth rates of -.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 22 and 27 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 46,69 and the number of pay-to-use machines decreased to 2,65 representing a 7% to 3% 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 212 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 29,13 machines. This compares with 3% (19,612 machines) for BBS and 13% (8,598 machines) for social and leisure combined. The number of withdrawals at cash machines in 212 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 211 following declines in 29 and 21. UK Cash & Cash Machines 213 7

8 The number of withdrawals at IAD owned machines increased by 38% in 212 to reach 384 million. Corresponding withdrawal values grew by 36% to reach 2.4 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 211 and 212; there were 2.6 billion withdrawals amounting to 176 billion in 211; in 212, 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.% to 1.7 billion with values increasing by 4.% to 11 billion. The increase in activity at off-site locations was centred in the retail sector. Since March 21, 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 21 there were around 1.25 billion worth of 5s in circulation. As at the end of February 212 the value of 5 notes in circulation had increased to 1.48 billion. Additionally by the end of 212, over 5,5 ATMs were dispensing 5s, with a wide geographical spread, compared to just 67 in 29; and around 1 in every 8 ATMs operated by banks and building societies dispensed 5s. Over the next 1 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 216 but they are then expected to begin falling year-on-year to 222. Volumes are forecast to be 2.6 billion in 222, 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 2 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 212. 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 212. 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 212 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 22. 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 211. 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 1 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 222. 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 222. 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 213. 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. 8 UK Cash & Cash Machines 213

9 Section 2: Spending our cash 2.1 Overall cash payment volumes and values Chart 2.1 Total number of cash payments Consumers use of cash Chart 2.2 Consumer cash payment numbers by sector 22 and Volume billions Volume billions 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 212 consumers and businesses made a total of 2.8 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 212 cash was used for 54% of all payments in the UK, compared with 71% in 22. 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 % of these payments were made by cash compared with 84% in 22. 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 2% of the value of all personal payments in 212; this compares with 3% of spending in 22. Retail Travel & entertainment Person-to-person and person-to-business Non-financial regular bills Financial 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 22. The volume of payments for non-financial regular bills 1 has also fallen significantly. In the other areas volumes have been falling more slowly and in 212 were around 8% of 22 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 2.3 Percentage of all consumer payments in selected merchants made by cash 212 Electrical goods Clothes shop Supermarkets Discount store Cafes/snack bars Off-licence Convenience stores Pub/club Newsagents % 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, gas and electricity bills and charity subscriptions. UK Cash & Cash Machines 213 9

10 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 3% of total consumer spending in the retail, travel and entertainment sectors in 212. The sectors most dependent upon cash included newsagents and pubs/clubs, where over 8% of spending last year was in cash, and convenience stores at around 7% of spending. The sectors least dependent upon cash include jewellers and travel agents where less than 1% of spending was by cash in 212. 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 212 around 28% of consumer spending in these sectors was by cash compared with around 4% in 22. Chart 2.4 Percentage of all consumer spending for retail, travel and entertainment made by cash % of spending 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 212 cash was used for around 7% of person-to-person and person-tosmaller business transactions, a proportion which has changed little for the last five years. 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. 2 Source: Bank of England. Follow link for more details: 1 UK Cash & Cash Machines 213

11 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 212 cash was used for 8% of financial payments compared with 14% in 27. Chart 2.5 Percentage of selected non-financial regular bills paid by cash in Membership of motoring organisation Chart 2.6 Consumer cash payments by value band 212 Volume billions Cable/satellite TV Utility bills. < 1 1 to 5 5 to 1 1 to to 2 2 to to 5 5 and over Club subscription Road tax Rent Nurseries/childcare Christmas clubs % Cash payments are predominantly of low value with 56% of cash payments in 212 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 27 there were an estimated 6.8 cash billion payments of that value, in comparison there were 4.4 billion in 212. The proportion of all non-financial regular bills paid by cash is also low and has been falling steadily. Around 1% were paid in cash last year compared with 12% in 27. 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. 2.3 Users of cash Chart 2.7 Cash-only users Adults millions Note: Pre-paid electricity or gas meters are not included in these figures. UK Cash & Cash Machines

12 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 1 million for a number of years, representing 2% of the adult population. However, this saw a steep fall over the years 27 to 211 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 211. The number of cash-only users rose in 212 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 213. Looking at the sort of people who are cash-only users, cash has a key role in budgeting for low-income consumers in particular, including both lowpaid 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. Chart 2.8 Cash-only users by different groups 212 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. Chart 2.9 Cash payment volumes per week per adult 212 Working status Disabled Looking after home Retired Student Job seeker Self-employed Part-time employee Full-time employee Household income 5, or more 3, to 49,999 2, to 29,999 1, to 19,999 Up to 9,999 Female Male Total Average number of cash payments per week Working status Disabled Looking after home Retired Student Job seeker Self-employed Part-time employee Full-time employee Household income 5, or more 3, to 49,999 2, to 29,999 1, to 19,999 Up to 9,999 Female Male Total % in group making all their day-to-day payments by cash 12 UK Cash & Cash Machines 213

13 Cash use compared with that of other payment methods by adults in different socio-economic groups 4 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 7% 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 Working status Disabled Looking after home Retired Student Job seeker Self-employed Part-time employee Full-time employee Household income 5, or more 3, to 49,999 2, to 29,999 1, to 19,999 Up to 9,999 Female Male % of payments by method 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 2, 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. Cash Card Automated Cheque/other Chart 2.1 Cash payments by purpose in different groups 212 Working status Disabled Looking after home Retired Student Job seeker Self-employed Part-time employee Full-time employee Household income 5, or more 3, to 49,999 2, to 29,999 1, to 19,999 Up to 9,999 Female Male % of cash payments in sector Food & drink Entertainment & Leisure Other Other goods Finance Travel Other regular bills 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. 4 Further information on socio-economics groups can be found at UK Cash & Cash Machines

14 Section 3: Cash machines 3.1 Number, location and availability of cash machines Overview The overall number of cash machines in the UK increased slightly by 2.7% during 212, a net increase of 1,765 machines to bring the year-end total to 66,134 cash machines. This makes 212 the highest end-of-year total seen so far. In the decade to 212 the growth rates in the deployment of cash machines appeared to follow a cycle. The first phase of the cycle was between 22 and 24 when the growth rate gradually increased from 11% to a peak of 17%. It is possible that between 25 and 27 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 28 which was followed by growth rates of -1.5% and.4% in 29 and 21 respectively. More positive growth returned in 211 and 212 with growth rates of 2.% and 2.7% respectively. In numerical terms, between 27 and 212 there were 2,154 installations of additional cash machines compared to 23,155 between 22 and 27. Chart 3.1 Rate of growth in number of cash machines (based on the number of cash machines at year end) % Ownership of cash machines In the decade to 212 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 212 while the number of BBS owned cash machines decreased by 1.2% to 34,697 in 212. The majority of this expansion was a result of the acquisition of BBS cash machines by IAD operators. Average annual growth of 51% during 23 and 24 took the number of IAD owned cash machines from a relatively low base of 9,58 in 22 to 21,683 in 24. 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 25 and 27 to an average of 11% leaving the number of IAD cash machines at 29,29 at the end of 27. The start of the recession probably accounted for the negative growth rates in 28 and 29, which reduced the number of machines to 27,13 by the end of 29. Positive growth returned in 21, with a recorded growth rate of 7.5% in 212, which brought the number of IAD cash machines to 31,437 by the end of 212. 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 22. There was then steady annual growth of around 1.8% until 21 when the number of BBS cash machines peaked at 36,23. Since 211 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 212. The reduction over 211 and 212 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 22 and 212, has mainly been driven by the increasing number of IAD machines. Consequently the period between 22 and 212 saw a shift in the ownership of cash machines. In 22 the ratio of BBS to IAD cash machines was 77% to 23% which gradually changed to 56%:44% by the end of 25 a proportion that stayed relatively unchanged until the end of 211. In 212 there was a near even split of 52% to 48%. Chart 3.2 Ownership of cash machines (as at year-end) Thousands BBS IADs 14 UK Cash & Cash Machines 213

15 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 212. The number of free-to-use machines increased by 5.1% in 212 while the number of pay-to-use machines decreased by 2.3%. Between 22 and 212, there was an average annual growth of 4.% in the number of free-to-use machines, expanding from 31,317 in 22 to 46,69 in 212, 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 machine 5. 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, 84 new free-to-use ATMs have been installed, helping consumers in over 1,3 target areas. The industry invests an extra 86, per year to maintain these machines. There have been two distinct periods of growth in the number of pay-to-use machines between 22 and 212 with positive growth between 22 and 27 followed by negative growth from 28 onwards. The period between 22 and 24 recorded robust growth, averaging 5%, and saw the number of pay-to-use machines increase from 9,58 to 21,683. Growth rates subsequently averaging 6.5% annually between 25 and 27 took the number of pay-to-use machines to a peak of 26,115. Between 28 and 212, the number of pay-to-use cash machines declined by an annual average of 5.1% to stand at 2,65 by the end of 212. 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 22 and 212 show a shift between the number of free-to-use and pay-to-use machines. In 22 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 6%:4% by the end of 24 which remained relatively unchanged until the end of 28. The decline in the number of pay-to-use machines which started from 27 along with the continued steady ascent in the number of free-to-use machines translated into a split of 7%:3% by the end of 212. Chart 3.3 Number of free-to-use and pay-to-use cash machines (as at year-end) Thousands Free-to-use Pay-to-use 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 212. The decade to 212 recorded minimal growth in the number of on-site machines, with an average annual growth rate of.2% between 22 and 212. In contrast, the number of off-site machines grew by 4.6% in 212 to stand at 46,522. The growth profile of off-site machines in the decade to 212 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 22 to 35,123 in 24. After this, annual growth averaged 8.4% between 25 and 27 increasing the number of off-site machines from 39,22 to 44,719. Negative growth was observed during the recession in 28 and 29 when annual growth averaged -1.9%. In the three years to 212 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 22 to 7%:3% in 27. Continued low growth in both the number of on-site and off-site machines meant that this ratio hardly changed in the years to 212. At 46,522, the number of off-site machines was at its highest level in 212, more than double the number of on-site machines. 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. UK Cash & Cash Machines

16 Chart 3.4 Number of on-site and off-site cash machines Chart 3.5 Number of on-site and off-site cash machines (showing free-to-use and pay-to-use) 3 25 Thousands Thousands On-site Off-site On-site free-to-use Off-site free-to-use Off-site pay-to-use 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 27 44,719 14,767 5,914 2,412 7,649 3,716 3,192 3,52 1, ,265 13,49 7,8 2,56 7,239 3,662 3,141 3, ,73 13,57 8,182 2,682 6,561 3,86 3,17 3, ,513 15,668 6,489 2,834 5,659 3,197 3,61 3, , ,486 16,532 6,72 3,95 5,19 3,465 3,77 3, , ,522 19,293 6,853 2,867 5,53 3,95 3,113 2, , 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 27 and 212, 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 minisupermarket 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 212 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 28 and accounted for most of the increase in the number of off-site free-to-use machines. There were 29,13 cash machines at these outlets by the end of 212, 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 212, in 28 this proportion was 17%. 16 UK Cash & Cash Machines 213

17 Chart 3.6 Premises where cash machines are located (end-212) Chart 3.7 Percentage of BBS cash machines offering additional facilities in 212 3,516 2, , , ,598 % ,13 Statement request Chequebook request Mini statement Interaccount transfer Bill payment Deposit Mobile phone top-ups On-site branch Supermarkets & other retail Social & leisure Post office Motoring & transport Services, workplace & mobile 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 13,38 per machine in 22 the number of mini-statement requests declined to 8,447 in 212. 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 212 compared with 6 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 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 212. 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 5% 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%. Chart 3.8 Availability of cash machines % 8 6 % 4 Mobile phone tops ups at cash machines increased steadily to a peak demand in 27 with an average of over 6 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 212 compared with 372 in Available 2.4% 1.2%.6%.4%.1%.% Hardware fault Cash out Supervisor Communications Journal roll Host down UK Cash & Cash Machines

18 3.2 Cash machine users Chart 3.9 Cash machine users Adults millions 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 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 22, 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 212 each user made 66 withdrawals compared with 7 in 27. 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. Chart 3.1 Cash machine users 212 Working status Disabled Looking after home Retired Student Job seeker Self-employed Part-time employee Full-time employee Household income 5, or more 3, to 49,999 2, to 29,999 1, to 19,999 Up to 9,999 Age to to to to to 24 Total % in group that are users of cash machines cash 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. 18 UK Cash & Cash Machines 213

19 Chart 3.11 Cash machine users by frequency 212 Chart 3.12 Number of cash machine and cash machine withdrawals: growth rates Less frequently Once a month Once a fortnight Once a week Several times a week % of cash machine users with frequency of use 3.3 Cash machine withdrawals % Total number of withdrawals Total value of withdrawals Number of ATMs (annual average) Withdrawals at cash machines: market overview Following two years of negative growth in 29 and 21, the return to positive growth in transaction activity at cash machines in 211 continued into 212. There were 2.9 billion withdrawals representing an increase of 1.4% compared to 211. The total amount withdrawn was up 1.2% to 194 billion with an average transaction value of This represents a fall from a figure of recorded in 211, a possible reflection of an increase in the number of lower denomination bank notes, in particular the 5 (see section 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. Analysis of average transaction activity per machine 6 reveals the stability of the industry since 27. The average number of withdrawals per machine was 44,677 in 212, slightly below a figure of 45,82 recorded in 211. The average total value withdrawn per machine in 212 was approximately 3. million, unchanged from 211. Chart 3.13 Per machine averages 1 5. Number of withdrawals thousands Number of withdrawals Value of withdrawals Value of withdrawals millions Distinctive factors drove the decrease in transaction activity at cash machines in 29 and 21. In 29 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 21 was driven in part by depressed consumer spending during the year. Meanwhile growth in 211 was principally driven by the increase in the number of off-site free-to-use machines, a dynamic that continued into The calculation of averages in this section is based on average numbers of machines per year. UK Cash & Cash Machines

20 3.3.2 Cash machine withdrawals: BBS machines The levels of transaction activity at BBS-owned machines decreased between 211 and 212; there were 2.6 billion withdrawals amounting to 176 billion in 211. In 212 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. Chart 3.14 Per BBS machine averages Number of withdrawals thousands Number of withdrawals Value of withdrawals 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 211. 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 212 each BBS machine was used on average to make 72,513 withdrawals a daily average of 2 transactions. On a per machine basis, approximately 5. million was withdrawn per annum, an average of 13,677 per day Value of withdrawals millions Cash machine withdrawals: IAD machines The number of withdrawals at IAD owned machines increased by 38% in 212 to reach 384 million. Corresponding withdrawal values grew by 36% to reach 2.4 billion. These increases were driven by strong growth in the number of free-to-use cash machines in 212. 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 33 million during 212, 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 211 to 73 in 212. Chart 3.15 Per IAD machine averages Number of withdrawals thousands Number of withdrawals Value of withdrawals Viewed on a per machine basis, transactions at all IAD-owned machines increased strongly in percentage terms during 212, 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 211. In value terms the total withdrawal per machine increased by 26% to reach just under.7 million, an average of 1,777 per day Value of withdrawals millions 2 UK Cash & Cash Machines 213