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ATM charges: UK government's position criticized but correct

21st July 2005

The UK government has been criticized for its positive stance towards the independent ATM sector.

The UK government has come under fire for its warmth towards the independent ATM sector. In stating that it was pleased to see the recent growth in independently-owned ATMs, the government's response to the issue has been dubbed a 'cop-out' by those opposed to fee-charging ATMs. However, despite such criticism, in Datamonitor's view the government is right to encourage the independent sector.

In responding to the UK Treasury Committee's Cash Machine Charges report by showing its support for independent ATMs, the UK government has been criticized by both Nationwide and consumer group Which?, with the latter accusing the government of adopting a "see no evil hear no evil" approach to the matter.

There has been much debate around the issue of independently owned ATMs lately. Consumer groups have argued that charging fixed fees for withdrawing funds places a disproportionate burden on lower income groups, and that replacing free-to-use ATMs in certain areas with little other ATM provision could result in greater financial exclusion.

However, those representing the industry have made a clear case for fee-charging ATMs, arguing that they offer an additional, rather than replacement, service to that provided by the bank-owned network.

The UK government's position is in line with the industry argument. It sees the growth of this market as positive, and would only be concerned if the number of fee-free ATMs was significantly reduced. Its response also reinforced the need for transparency, to ensure consumers can easily decide which ATM to use. Further, it answered criticisms over the introduction of fee-charging ATMs into Post Office branches, noting that funds can still be drawn at the counter without charge.

In many ways, the UK government's support for the independent ATM market should come as no surprise. The opening up of the LINK network to independent operators followed the recommendation of the government-commissioned Cruickshank Report, so it would seem unlikely for any other position to be adopted.

However, it is also difficult to argue that the growth of the independently owned ATM sector has not enhanced consumer choice. According to APACS, there were 27,400 bank or building society-owned ATMs in the UK in 1999, and no independently-owned machines. By the end of 2004, there were over 32,700 bank-owned and just under 21,700 ATMs owned by independent ATM deployers. Clearly, the overall picture these figures paint is one of increased choice for consumers in terms of where they can withdraw their money.

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