As the major banks offload their non-branch ATM fleets, the era of universal fee-free access to automated tellers appears to be coming to an end.
ANZ’s decision earlier this month to sell 1300 off-site ATMs to Armaguard means that other deposit taking institutions will have to negotiate new deals for their customers to continue using the machines for free.
Armaguard plans to re-brand the machines next year and charge card issuing institutions a fee each time one of their customers withdraws cash.
ANZ has already negotiated a fee arrangement with Armaguard, which industry sources suggest equates to between 90 cents and $1.20 per transaction for at least the next three years.
Westpac, which sold its off-site network of 750 ATMs to Prosegur last year, has established fee-free access for its customers under a similar pricing arrangement.
While these deals guarantee that each major bank will continue to provide their proprietary customers with free access to their preferred external network operator (Armaguard or Prosegur), ANZ and Westpac are unlikely to enter multiple agreements to ensure free access to all ATMs across the country.
The national landscape could get even more messy if NAB or CBA decide to sell off-site fleets to other market aspirants such as American-owned ATM specialist, NCR.
NAB is believed to have opened a conditional tender process earlier this year with a view to eventually offloading non-branch ATMs, but the timing of any sale is not certain.
CBA, which stridently resisted attempts by the other major banks to establish a pooled national ATM network in the last three years, has not signalled its strategic intentions.
The reconfiguration of ATM ownership is likely to create challenges for branchless banks, including customer-owned institutions, that rely exclusively on ATM networks to put cash in their customers’ hands.
Banks and credit unions will soon face a choice to either subsidise customer use of the Prosegur-owned machines or leave account holders exposed to a default charge each time they access an ATM.
The prospect of a national utility, which has the support of the Reserve Bank, now seems remote given that Armaguard and Prosegur are reshaping the market on a fee-for-service model.
This economic transformation of the ATM marketplace might be unsettling officials in the RBA’s payments department, who have advanced support for a shared ATM model on the grounds that it could preserve access to cash for people living in regional and remote communities.
The RBA’s head of payments Tony Richards articulated the case in a speech he gave in November 2018 to the Australian Payments Summit.
“As cash use falls, financial institutions may reduce their provision of cash services. There are already some signs of this in the ATM market, where bank and non-bank deployers have begun rationalising their fleets,” he told the summit.
“Policy concerns could arise if there was a significant decline in ATM coverage that made it difficult for people to access cash, particularly in remote or regional locations.
“However, some sensible consolidation of the ATM network could result in a more efficient and sustainable ATM industry – one possibility is that this could come through some form of industry utility.
“I expect that we would have an open mind to an arrangement that resulted in a more sustainable ATM industry that continued to provide services where they are clearly still needed.”
If the new trend for banks to relinquish ownership of ATM networks intensifies, the RBA might find it difficult to persuade the new monoliners to retain services in uneconomic locations outside metropolitan centres.
In such a circumstance the RBA’s response would likely hinge on assessments its makes about the capacity for rural communities to migrate successfully to digital payments.
If the RBA determines that the demand for cash is persistent, then lawmakers might come under pressure to impose community service obligations on the operators of ATM networks.
Such obligations could include requirements to upgrade automated tellers with deposit functionality in towns without bank branches.
It’s a regulatory risk that Armaguard, Prosegur and potentially others, are acquiring.