ATM 'deserts'–On the path towards a cashless society

Roughly 60 bank branches and 488 cashpoints are closing per month in the UK, which has led to the term 'ATM desert'. An ATM desert is just what it sounds like – an area with little or no access to cash withdrawal. A town in Stoke-on-Trent became the first to have no access to free cash points, leading the media and the public into a debate on the pros and the cons of a cashless society.

Between the first quarter of 2014 and the second quarter of 2016, the number of UK cash points rose to 70.6 thousand. We have, however, seen a decline in recent years which is linked to a shift towards online banking and modernized payment processes.

Statista found the UK to have 65.4K ATMs and Europe 420.2K. With high street banks regularly closing, this data could change any day now. For the first time ever, debit cards have overtaken cash as the UK's favorite payment method.

In 2018, consumers looked to their debit cards to make 13.2bn transactions, which is a 14% increase from 2016. Cash transactions fell 15% as a result.

This isn't surprising, considering two-thirds of the population use contactless payments and contactless cards are responsible for 5.6bn of the 13.2bn transactions. So we seem to be going along with the transition from cash to card.

It's easy to make assumptions about this topic, and if the shift from cash to digital payments isn't executed properly, certain demographics of people could be excluded.

However, there are endless benefits for both merchants and consumers. Countries like Sweden are introducing programs to make sure people who aren't FinTech fluent can keep up. Let’s dig a little deeper.

Burslem, Stoke-on-Trent: ‘ATM desert’ or an opportunity?

A British town called Burslem made headlines recently for becoming the first large town in the UK where you can no longer withdraw cash for free. Every ATM now charges 95p per withdrawal.

Free ATMs are becoming expensive for banks, and with high street banks like NatWest, Lloyds, and Nationwide closing down branches, ATM withdrawal fees have surged, often affecting rural areas the most.

This has prompted a lot of negativity, and locals say they're “feeling robbed of free access to their funds, while business owners and shoppers say the lack of cash machines makes things very difficult.”

But what if we looked at things a bit differently?

People wouldn't be withdrawing cash from ATMs if they didn’t have cards. So the issue here is less that ATMs are now charging, and more that merchants don't have access to reasonably priced, bureaucracy-free payment solutions.

This is more of a merchant problem than a customer problem. As a company that works with micro-merchants, we know that keeping a smaller business afloat is already very difficult. The prevalence of ‘ATM deserts’ just makes things tougher. So what’s the solution? Filling the card acceptance gap. Traditionally, ordering a card reader for your business was quite a process. More long-established, standard card machines have always been expensive, and for small businesses, they come loaded with bureaucracy that is often too much of an inconvenience to bypass.

That’s where issuers like SumUp come into the equation. Our goal is creating affordable and easy technology that helps bring small businesses into the future, so nobody gets left behind. The digital revolution doesn't have to be classist or exclusive.

Accepting card payments not only makes business more efficient, it also allows people to make purchases that don’t break the bank. It’s possible to purchase an item with a value of £1.00, but you can't get £1.00 out of an ATM, for free or with a fee.

Sweden: A cashless IKEA, e-krona and a decrease in crime

In 2018, The New York Times released an article on Sweden’s push to get rid of cash, and some of the backlash (and praise) that resulted. Sweden is living in the future when it comes to payments.

“Ask most people in Sweden how often they pay with cash, and the answer is “almost never.” A fifth of Swedes, in a country of 10 million people, do not use automated teller machines anymore. More than 4,000 Swedes have implanted microchips in their hands, allowing them to pay for rail travel and food, or enter keyless offices, with a wave. Restaurants, buses, parking lots and even pay toilets depend on clicks rather than cash.”

Sure, the microchips may be taking things a little far, but as a society, they've embraced digital payments of all kinds. 18-24-year-olds in the country make more than 95% of their purchases with a debit card or a Swedish smartphone app called Swish, which is a payment system put into place by the country’s largest banks.

An Ikea in Gavle even tested the effects going cashless for a month would have on their business. They did this because only 1% of their shoppers paid for items using cash, and that was mainly in the cafeteria.

They also discovered that employees spent roughly 15% of their time sorting through cash and counting change. The test gave employees more time to focus on their work and help customers out on the sales floor.

It turned out that only 1.2 of every 1,000 customers were not able to pay as a result of the experiment. And since this usually happened in the cafeteria, employees would give the food to customers for free.

Crime rates have also gone down in Sweden because banks and merchants handle less cash; “Last year, only two banks were robbed, compared with 210 in 2008 because banks are keeping less cash.”

There have, of course, been some concerns raised regarding the speed of the cashless movement and whether or not it would exclude older generations. The Swedish National Pensioners Organization’s leader, Christina Tallberg, stated that:

“We have around one million people who aren’t comfortable using the computer, iPads or iPhones for banking. We aren’t against the digital movement, but we think it’s going a bit too fast.”

While this may be true, Sweden is reaching out to the older generation, with open courses and access to information that makes going digital easier. The model would be good for other countries to take into consideration.

As banks become more cashless, a digital currency called the e-krona will be introduced in 2019. The purpose of the e-krona would be to calm down the current cash situation by ensuring that the “functions of a currency backed by the state would remain, even in an all-digital world that is fast approaching.”

Adapting to a cashless society: What are the benefits?

It’s already started to happen. As LivenPay pointed out;

“Sweden and Mexico have already rolled out real-time payment systems like the NPP. In 2016, India removed its highest denomination bills — removing 90% of paper money from circulation. The People’s Bank of China is looking into digital currencies and has acknowledged that physical cash may one day become obsolete.”

So, why are economies going cashless? The most obvious benefit is convenience and efficiency. It’s a lot faster to tap a card down on a reader than to hunt for loose change in your wallet, but a few other advantages are:

  • Increased security for both merchants and the people who shop in their stores

  • A cutback in time spent on accounting

  • A proven increase in spending

  • A reduction in money spent producing cash

What needs to happen first?

We're still a ways away from a cashless society, but changes should be made now so there's a solid foundation is in place for the future. Two things, in particular, need to be done:

  1. The technology needs to be up to scratch.

  2. Nobody should be left behind.

Banks need to start stepping up to the plate. While Open Banking and PSD2 will certainly help them to modernize, banking technology needs some sort of a "facelift.”

According to Which? Money says that “British banks are being hit by IT or security failures that prevent customers from making payments at an average rate of more than once a day.” It’s no wonder that consumers are looking towards forward-thinking FinTech companies to gain more control over and safer access to their funds.

We also need to make sure that everyone is along for the ride. Merchants need to have access to cheaper, simpler ways to manage and accept payments, and customers need to feel as though they are part of the digital revolution.

There will be some people who will struggle in cashless society, but it should be our job to take them with us with simplified technology, education, and affordable services. Take your business into the future with one of our card readers and visit our blog for more business tips and tricks.

Anna Marie Allgaier