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30 October 2013

The Rt Hon Frank Field MP DL

HOUSE OF COMMONS

LONDON sw I A OAASir John GieveChairmanVocaLinkDrake House, Three Rivers CourtHomestead RoadRickmansworthHertfordshire, WD3 lFX

~7~I recently undertook a piece of research into the issue of cash machine charges in Wirral, where myconstituency is based, and found there to be a high concentration of cash machines that charge forwithdrawals in the poorest parts of the borough, in comparison with the wealthier areas that havefew, if any cash machines that charge for withdrawals.

Similar patterns were uncovered by Which? in a study of cash machines in London, conducted inJanuary 2013.

Whilst I understand the overall number of cash machine charges has steadily declines since 2006,the number of cash withdrawals charged still stands at almost double the amount in 2001, and itappears to be disproportionately impacting on poorer areas of the country. I enclose a copy of anarticle I wrote in my local newspaper on this issue.

Might it therefore be possible to know whether LINKATM takes into consideration the distributionalimpact of cash machine charges, and their contribution to the 'poverty premium'?

I would also be grateful to know when LINK ATM last reviewed its working practices in relation tocash machine charges, and any guidelines issued to LINK Members on this issue.

I would be very pleased to meet with you on this issue.

...

With best wishes,

www.frankfield.co.uk

LINK Scheme

11th November 2013Sir John GieveChairmanVocaLink5th Floor,60 Gresham Street,London, EC2V 7BB

Dear Sir John,

Thank you for sending me a copy of the letter that you have received from Rt. HonFrank Field MP regarding LINK's approach to cash machine charges in hisconstituency of Birkenhead and across the UK. I have set out below answers to MrField's questions and a proposed course of action. Please let me know if you wish towrite back personally to Mr Field with this information or whether I should makecontact myself.

LINK exists to provide universal access to cash to all UK consumers and we activelymonitor the situation across the UK to identify areas where there might be aconsumer problem with regards to free cash access. I will review the position inBirkenhead and the Rock Ferry area straight away so that we have evidence tosupport Mr Field in his assessment of the situation in his constituency. Often we findthat an on the ground visit is also useful to identify problem areas that don't show upon our central maps (for example, access problems caused by local features such asbusy roads, railway lines, etc.) and we make frequent visits to areas facing difficultieswith the support of the local MP. If Mr Field or one of his constituency staff would bewilling to meet with us in Birkenhead and help us understand any specific problemareas that would be very useful. We could also take the opportunity to run through inmore detail the programmes LINK has to ensure free access in deprived and ruralareas where normal circumstances might not commercially support the installation ofa free machine. Please let me know if you would like to make the offer of such ameeting yourself or whether you would prefer us to make contact with Mr Fielddirectly. You are very welcome to join any visit that is arranged if you would find thatof value.

Mr Field rightly points out that, prior to 2006, there was a problem highlightedregarding the removal of the last ATM in town. In 2006, supported by the TreasurySelect Committee and Sir John (now Lord) McFall, LINK introduced a FinancialInclusion Programme to encourage free-to-use machines. As a result, since 2006,there have been a significant number of the most deprived locations in the UK wherea free to use ATM is now available to consumers.

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LINK Scheme

The number of charging transactions has also reduced from 4.3% of all withdrawalsto 2.5% across the county. Siting of ATMs is a commercial competitive market, and inmost cases pay to use machines are in locations which would otherwise be unviablefor an ATM because of low numbers of transactions. The fees received help supportconvenient choice for consumers as well as providing a valuable source of income tosmall retailers and Post Offices. All charging ATMs in the UK are provided byindependent companies specialising in ATM deployment and none by banks.

We do monitor the proportion of charging machines in deprived areas as an indicatorof potential consumer problems and at present, whilst deprived areas do have ahigher number of overall machines due to higher consumer cash usage, they alsohave a higher proportion of free ATMs. This type of monitoring and the FinancialInclusion Programme has helped us identify over 1,300 areas for support over thelast 7 years which as a result now have free-to-use ATMs. These include the ParkRoad North, Bebington and Fender Way areas in Birkenhead. LINK actively reviewsthe position though an independent LINK Consumer Council that meets on aquarterly basis. The Council includes independent members from CAB, Toynbee Halland Consumer Focus Northern Ireland. Lady Margaret Bloom and Teresa Pearce MPare also independent members of the Council. We will discuss your letter and thematters that you have raised at the next Council meeting in December and feedbackany additional actions suggested.

Mr Field also mentioned the work conducted by Which in January and we believethat, following meetings and correspondence with Which and visits to the areas ofLondon mentioned, that the issues raised have been addressed. We do recognisethe point that Which make in their article that motorway service stations have ahigher proportion of charging machines than other parts of the country. Howeverwith the guidance of the LINK Consumer Council we have concluded that this is not apriority for investment to address as there is no evidence of harm to consumers anda good case for the additional coverage that charging machines provide at sites thatwould otherwise have no cash provision.

Thank you again for providing the opportunity to respond to Mr Field's questions.Any advice on additional information or measures that VocaLink think could beprovided are as always welcome.

Yours sincerely,

John

John HowellsChief ExecutiveLINK Scheme

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The Rt Hon Frank Field PDL

11HOU E OF COMMO S

LO DO. WIA OAA

John HowellsChief ExecutiveLINK Schemecio Drake House, Three Rivers CourtHomestead RoadRickmansworthHertfordshire, WD3 lFX

13 November 2013

Thank you for your letter of 11 November which Sir John Gieve has passed on to me. I would be grateful if

you could answer a few additional questions please on pay-to-use ATMs.

Might it be possible to know how many additional free-to-use ATMs have been located in deprived areas in

the UK, and Birkenhead in particular since the introduction of the Financial Inclusion Programme in 2006,

and what proportion of the total number of ATMs they now compose in their local area? I would also be

grateful for an annual breakdown of the subsidy granted to improve usage and availability of free-to-use

ATMs in deprived areas since 2006.

Given your remarks about commercial viability and competition, I am deeply concerned that people on low

incomes are having to pay for their own privilege and that of others on low incomes to withdraw cash in

their local general store, newsagent or pub. More than half of all ATMs charge for cash withdrawals in

Prenton, Tranmere and Rock Ferry in my constituency. Might I ask what measures are in place to reverse

this situation in the months and years ahead, and whether you would consider commissioning a survey of

the relative effect of the cost of pay-to-use ATMs on household in each income decile?

If you hold such information, might it also be possible to receive data on the annual profits of InfoCash Ltd,

Notemachine, Omnicash, Moneybox Corporation Ltd, Paypoint, Bank Machine Ltd, and YourCash ATM

Systems Ltd who all operate pay-to-use ATMs in Birkenhead?

twww.frankfield.co.uk

LINK Scheme

zs" November 2013Rt. Hon Frank Field MP DLHouse of Commons,Westminster,London,SW1AOAA

Dear Mr Field,

Thank you for your recent letter requesting further information about ATMs and theLINK Scheme. I attach answers to each of your questions as an appendix.

I share your concern to ensure that people on low incomes, and other vulnerablegroups such as the disabled and elderly, have good free access to cash. Whilst ourcurrent evidence is that the picture is positive, I am keen to conduct further researchshould you believe that the situation is not working for these consumers on theground. If there is evidence that free access to cash is not adequate then I amcommitted to sponsoring changes to how LINK operates with our memberorganisations (the various ATM deployers, banks and building societies that make upLINK).

You mentioned the possibility of LINK commissioning research and I will investigateoptions, initially with Citizens Advice and Toynbee Hall, as they are represented onLINK's independent Consumer Council and have conducted independent researchfor us previously. It would be useful to discuss the scope of that work with you once Ihave identified an external organisation prepared to conduct it. Is that something thatyou would be willing to consider?

I look forward to hearing from you.

Yours sincerely,

sc-~~/- / John Howells

eEO, LINK Scheme

••Cert No. 0002

4 Cardale Park, Beckwith Head Road, Harrogate, North Yorkshire, HG3 1RYTelephone: 01423356000

e-mail: linkinfo@link.co.uk • http://www.link.co.uk

Answers to Mr Field's Supplementary Questions

Details on Financial Inclusion Programme

The LINK Financial Inclusion Programme was instigated in 2006 to address areas ofrelative deprivation that had poor access to free-to-use cash machines. Theprogramme provides a subsidy to free-to-use Financial Inclusion ATMs installed in orclose to identified "Target Areas". Target Areas are defined as Super Output Areas(SOAs) in the lower quartile of the Index of Multiple Deprivation as defined by theOffice for National Statistics. At the start of the programme, LINK identified c. 1,700Target Areas which either had no free-to-use ATM within them or within 1 kilometerof their centre. All LINK Members who issue cards pay a transactional subsidy eachtime one of their customers uses one of these Financial Inclusion ATMs.

Since the Programme went live, 916 free-to-use ATMs have been installed in oradjacent to Target Areas, thereby resolving over 80% (1,425) of Target SOAs.Around 1.5 million people live in these area.

LINK regularly tracks and reports progress of the Programme and in 2012 LINK,working with its Consumer Council, identified an issue with some areas, often rural,which did not have easy access to cash but which were considered "insufficientlydeprived" to have a subsidised ATM. LINK and its Members agreed to enhance theprogramme to enable a wider range of areas to be considered. Since then anadditional 106 ATMs have qualified for the premium under this additional programme.

Birkenhead ATM Position

In the Parliamentary Constituency of Birkenhead there are 108 ATMs, 71 of whichare free-to-use and 37 pay-to-use. Birkenhead has four Target SOAs in the LINKFinancial Inclusion Programme, being deprived and having an issue with access tocash and these have all been resolved, according to our criteria, by the installation ofthe following ATMs:

SOA ATM operator Address PostCode

E01007133 Bank of Ireland Post Office PO 138 Park Road North CH418AB

E01007290 Bank Machine Martin McColls 86 Highfield Rd CH422DA

E01007119 Bank of Ireland Post Office PO 44 Fender Way CH437ZJ

E01007124 Bank of Ireland Post Office PO 44 Fender Way CH437ZJ

Below is a map of the Constituency where the resolved areas are shown in green,free-to-use ATMs are Blue Triangles and pay-to-use ATMs are Red Squares. Pleasenote multiple ATMs on the same site are shown as a single icon.

Each free-to-use ATM has a blue circle printed around it with a radius of 1 kilometeras this is the distance LINK uses when assessing access. However, this does notaccount for any local obstacles like rivers, railway lines or major roads. It does

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however show that almost all of the constituency is less than 1 kilometer, as the crowflies, from a free-ta-use ATM.

-.--•...As mentioned in our previous letter we often find that an on the ground visit is veryuseful in identify problem areas that don't show up on our central maps (for example,access problems caused by local features such as busy roads, railway lines, etc.)and we make frequent visits to MPs to look at areas facing difficulties. If you or oneof your constituency staff would be willing to meet with us in Birkenhead and help usunderstand any specific problem areas we can look to work with our Members toresolve these for you.

Charging Versus Free ATMs by Areas of Deprivation

At a national level, our evidence is that all machines, both free-ta-use and pay-ta-useare concentrated in more deprived areas, rather than wealthier districts. We believethat this is because lower income groups are heavier users of cash and this makes itcommercially attractive for deployers to site free machines in lower income areas andthese areas usually have a larger number of suitable locations such as conveniencestores, small supermarkets, etc. These sorts of locations are less common in wealthysuburbs, for example.

The chart below shows the number of free-ta-use ATMs and pay-ta-use ATMsnationally in areas ranked by deprivation.

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fI)s 30....,~ 25o•...~ 20E::l 15z

10

Number of ATMs per 5 SOAs ordered by deprivation - mostdeprived to least deprived

45

40

35

5

o - -0-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50 51-60

SOAs grouped in Ss by deprivation

• FTU ATM PTUATM

Most free-to-use ATMs are concentrated in the five most deprived SOAs with thenext 5 having a higher than average number as well.

However ATM numbers do not tell the whole story as free-to-use ATMs are muchmore heavily used than charging machines (97% of all transactions). The chartoverleaf shows ATM usage rather than numbers (not including withdrawals by abank's own customers at that bank's own ATMs as these are not covered by LINK)using the same SOA grouping. ATM cash withdrawals are concentrated in the mostdeprived areas although there are also a significant number in the 36-45 bands aswell.

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Number of monthly cash withdrawals by SOAs

.J:. 120,000•..c:0E 100,000•..Cl)Cl.

.!!2ItI 80,0003:ItI•..

"C.J:.•..60,000'3

.J:.'"ItIU 40,000~Z::::i-0 20,000•..Cl)~E:::lZ

0-5 6-10- L--

11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50 51-60SOAsgrouped into Ssby deprivation. Most to least

• FTU Wdls • PTU Wdls

Subsidy Paid by Banks and Building Societies for Free-To-Use ATMs

Banks and building societies pay the entire cost of all of the UK's 45,000 free-to-useATMs. This is approximately £650m per annum. In addition, they pay about £BOOkper annum to support consumers in the most deprived areas via the FinancialInclusion Programme.

Surcharging machines are all operated by non-bank independent deployers. Thefees cover the cost of running the ATM and this will include rent to the independentretails where they are located, a valuable source of income for what are often lowmargin businesses. The retailers typically provide the cash, also providing them withthe secondary benefit of reduced bank charges for cash handling. Because thevolume of cash available to these retailers to stock their ATM is limited to what's inthe ti!l, these sites would not normally be able to support the higher volumes of afree-to-use ATM.

Profit Data on Independent Deployers

We do not hold or ask for profitability of any of our Members. LINK only confirms thatits Members are able to meet their financial settlement obligation within the Schemerules.

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