The Way We Get Cash a Report Into Cash Machine Use in the UK During 2004 Contents

UK Payments Association

The Way We Get Cash A report into cash machine use in the UK during 2004 Contents

Foreword 03 The cash machine customer 04 Cash machines in the UK 06 How we get cash 08 Fighting cash machine crime 10 The future 11

ISBN 0 903689 72 3

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Foreword

Welcome to The Way We Get Cash, the annual review into how the British public gets hold of its money and, in particular, uses cash machines. Produced by APACS, the UK payments association, this report sets out key data on the use and role of cash machines in Britain today. Since the first cash machine withdrawal was made (by On The Buses actor Reg Varney, on 27 June 1967), we have come to depend on cash machines as the main way we acquire cash. Cash machines are part of everyday life and over the last 38 years we have become used to getting cash whenever and wherever we want to – not just when our banks and building societies are open. Over the last ten years cash machines have paid out more than £1,000,000,000,000 (or £1 trillion) to the public. Cash machines now provide us with more than half of our cash and nearly 33 million people are regular users1. Last year we withdrew £5,114 from cash machines every second. Importantly, 96.6 per cent of the £161.3 billion withdrawn from cash machines in 2004 was withdrawn free of charge. There was a record increase in cash machine use in 2004 with the number of withdrawals growing societies that APACS represents and those by 155 million and the total value of transactions provided by independent companies, which rising by £17.1 billion. This is due, in part, to the typically charge to withdraw cash. The industry continuing trend of more people using cash has accepted and engaged with this scrutiny machines more often and one-off factors such and where we believe that better policies are as the introduction of Direct Payment of benefits required we have acted. and pensions into bank accounts rather than This report looks at the characteristics, over-the-counter in post offices. Changes like behaviour and experiences of the average cash these have made cash machines as much of an machine customer and provides information on issue of social inclusion as of convenience. cash machines in the UK. It also looks at the Last year also saw the cash machine network different ways we get cash; the industry under scrutiny on issues of transparency and initiatives to make cash machines safe and access, in particular from the Treasury Select secure against crime; and the future of the Committee. This has focused both on cash cash machine network. machines provided by the banks and building We hope you enjoy reading it.

1 Using a cash machine every three months or more often 04_THE WAY WE GET CASH

The cash machine customer

The world’s first cash machine opened in Who uses cash machines? Enfield, Middlesex in 1967. Since then, the UK’s population has taken the cash machine to its More than seven in ten of us – 74 per cent – use heart, so that by the end of 2004, 32.9 million of cash machines regularly. This figure has risen us were using them regularly with our plastic steadily over the last decade, from around 53 per cards to withdraw cash, check our balances, and cent in 1994. The highest level of use occurs in deposit cash and cheques, as well as access the 25 to 34 year old age group, with 88 per cent other newer services such as topping up our of this group using cash machines to get at their mobile phones. cash. More than half of this group – 60 per cent – use cash machines once a week or more. From one lone terminal in Enfield, the UK now boasts thousands of machines from the Use of cash machines is lowest amongst those Shetlands to the Channel Islands. And it’s not aged 65 and over, although perhaps hard to understand why we’ve taken to cash surprisingly more than half of this group – 56 machines so readily. They are quick, convenient, per cent – use them to access their cash, with reliable and operate around the clock. almost a quarter (23 per cent) using them once a week or more on average. We are also able to use our cards in the same way with the same four-digit number in cash machines There is almost no perceptible gender difference right across the world thanks to the global in cash machine use; 74 per cent of women use agreements between card schemes, banks, cash machines as against a marginally higher 75 building societies and other card issuers – per cent of men. Figures for frequency of use by and wherever we are the cash machine will males and females are almost identical. speak to us in our own language. THEWAYWEGETCASH_05

Cashing in across the board Withdrawals per cash machine per annum

Cash machines are used right across all social 80 groups, with use highest amongst ABs – with 88 70 per cent of people in these groups using cash 60 machines. This figure drops slightly with each 50 s social class grouping, with cash machines used by d n a

s 40 only a small majority of Es (52 per cent). However, u o h this marks a significant drop – 15 per cent – t 30 compared to social class D (67 per cent usage). 20 As increasing numbers of people in social 10 groupings D and E open bank and building 0 94 95 96 97 98 99 00 01 02 03 04 society accounts, particularly in relation to the Banks and building societies payment of benefits, the number of people able Independent ATM deployers to use cash machines is rising. The Department for Work and Pensions indicated that an at 59 per cent, or 54 per cent by value. additional 5.3 million benefit payments were Interestingly, when we use a cash machine made directly into bank and building society owned by a different bank we tend to withdraw accounts during 2004. less – an average of £54 compared to £72. Ready access to our readies Overall, the average withdrawal made at a cash machine owned by a bank or building society is It seems we are more than happy to get our cash £64. This figure drops quite significantly to £45 at any time from anywhere and everywhere – for withdrawals at IAD machines. and although there has been a significant growth in the number of independently-owned cash A considerable number of people have now machines (known in the industry as IADs or begun to withdraw their benefits from cash independent ATM deployers), we still obtain the machines in a single transaction, contributing to vast majority of our cash – 96.6 per cent by value, the increase in the average value of transactions from 95.1 per cent of all transactions – from free- between 2003 and 2004, up around £3 from £61, to-use bank and building society-owned after year on year rises of just £1 between 2001- machines. This is illustrated neatly by the volume 2002, and 2002-2003. of cash typically withdrawn from each machine – averaging £13,000 per day at bank and building society owned machines, and only £800 per day at IAD machines. However, our loyalty to our own bank or building society machines has been dropping – transactions at machines not owned by the same bank that issued the card being used now stand 06_THE WAY WE GET CASH

Cash machines in the UK

Cash rich, time rich 25 Density of cash machines per 100km2 – 2003

Last year saw the largest annual increase in the 4 0 0

20 2

number of cash machines across the UK, with s e n i h

both the bank-owned estate and the IAD estate c

a 15 m h

reaching record numbers. With more machines s a c f

in more places, an increasing number of the o

r 10 e b

population have greater access to their cash, m u N and at times that are convenient, than ever 5 before. By the end of 2004, a total of 54,412 0 cash machines were in operation – that’s almost Spain Germany UK France Italy 8,000 extra machines since 2003.

55 Number of 40 On-site and off-site cash machines cash machines

50 s s d d n n a s a 30 s u u 45 o h o t h t s e s n e i n h

i 40 c h

a 20 c m a h m s h 35 a s c a f c o f r o e 10 b r 30 e m b u N m u

N 25 0 20 94 95 96 97 98 99 00 01 02 03 04 94 95 96 97 98 99 00 01 02 03 04 On-site (at banks and building societies)

Number of cash machines Off-site (at remote and convenience locations)

Social and leisure locations, including pubs, Number of cash machines per one million inhabitants bars, nightclubs, newsagents, corner shops and off licences, have been some of the biggest areas of cash machine growth. In many cases, these machines have provided access to cash in local more than 1,150 neighbourhood areas for the very first time. As a 950-1,149 result, the vast majority of people in the UK now

750-949 have easy access to a cash machine. By the end of 2004, UK coverage of cash machines less than 750 had reached 910 cash machines per 1 million inhabitants, with an average of 22.4 machines per 100km2. Research carried out by the Chip and PIN Programme in 2002 indicated that 91 per cent of people in the UK had access to a cash machine close to their home, 93 per cent close to their work and 98 per cent whilst using a supermarket. THEWAYWEGETCASH_07

Surcharging and non-surcharging cash machines: There are two reasons for this. Firstly, most number and transaction volumes customers who wish to avoid paying a charge

35 3,000 plan their withdrawals to be from free machines. Secondly, the independently-owned machine 30

s 2,500 d

n business model reflects that machines are sited a s s n u

25 o i o l l

h where low use is expected. A free-to-use cash

2,000 i t m s e s n e

i 20 machine would not normally be viable h m c u l a 1,500 o m v in an area where there is such low footfall.

h 15 n s o i a t c c f

1,000 a o s r 10 n Cash plus consumer protection e a r b T m

u 500 N 5 LINK, the UK’s principal cash machine network,

0 0 sets rules in respect of transparency of charges 00 01 02 03 04 that ensure that all cash machines must make Number of non-surcharging cash machines Volume of transactions at non-surcharging cash machines very clear to consumers any fee involved in Number of surcharging cash machines Volume of transactions at surcharging cash machines making cash withdrawals before the withdrawal is made. This is enshrined in The Banking Code. More machines, greater access In fact, LINK has recently strengthened these rules, with higher standards coming into force This growth in the number of off-site machines during 2005. has been boosted, in the main, by the number of independently-owned cash machines (IADs). Cash plus other services These machines, which are often portable and As the number and availability of cash machines located within shops or leisure venues, tend to grows so does the range of services they offer. charge a flat rate fee for a cash withdrawal. In As well as being able to withdraw cash, many many cases they are located in places where a machines allow customers to check their cash machine would not be commercially viable balance, request a statement and change without this fee. their PIN with the PIN services option. Whilst these IADs have contributed to the increase But that is not all. Cash machines continue to in the total number of cash machines, the number develop in terms of the services they offer. One of cash machines provided by the banks’ and of the fastest growing services on offer is a facility building societies’ estates is also the largest it has to top-up the credit on mobile phones. In October ever been. The vast majority of these bank-owned 2004 LINK announced that the one millionth cash machines are free to use and do not charge machine pre-paid top-up had been processed. a fee for cash withdrawal or other services. Another new initiative trialled in 2004 by one Despite a rise in their numbers of about cash machine owner was a so-called ‘intelligent’ 50 per cent since 2003, independently-owned cash machine that allows users to pay in cheques cash machines still make up a very small and make bill payments 24 hours a day. percentage of all cash machine transactions in the UK, carrying only about five per cent of all withdrawals, and even less of the total value of cash withdrawn (less than 4 per cent). 08_THE WAY WE GET CASH

How we get cash

More users, more often Paid direct, withdrawn direct More of us are using cash machines more often The reality of a cashless society remains a long to get our cash – it’s quick, easy, reliable and way off, so cash machines will continue to be convenient. Since 1999 the number of regular important. We are seeing more of our money cash machine users has grown steadily by paid directly into our bank accounts and we are 2.4 per cent per year and last year, for the first using cash machines more often to access it. time, three-quarters of all plastic card holders In 2004 we saw the impact of the government’s used a cash machine on a regular basis. On Direct Payment programme for benefits and average, users are using cash machines more pensions. This resulted in 5.3 million more often, now more than six times a month. benefit payments made directly into bank Cash machines have become the most popular accounts whilst such payments over-the-counter way of getting cash. An average of 80 in post offices fell by £18.5 billion. withdrawals were made and £5,114 taken out The average benefit payment over the counter of cash machines every second in 2004 – that’s is around £100. As a result of this change more a total of 2.53 billion cash withdrawals and people than ever before are withdrawing their £161.3 billion in the course of the year. benefit payments either from a cash machine, or over the counter from a post office or bank or Percentage of regular cash machine customers and total number of transactions building society branch. Last year this had two

70% 2,800 main impacts. The number of people who ever

2,600 acquire cash from an account over the counter in

65% s n o

2,400 i a post office, or from a bank or building society l l i m s s t 60% 2,200 leapt by more than three million to about ten l n u o i d t a c f 2,000 a million, and there was a big jump in the average s o n

e 55% a g r t a cash machine withdrawal last year – up £3 to

t 1,800 f n o e r c e r £64 – reflecting the fact that a lot of people b e 50% 1,600 P m u n

1,400 l were taking their benefits out of a cash machine a t

45% o 1,200 T as a single transaction.

40% 1,000 94 95 96 97 98 99 00 01 02 03 04 Percentage of adults who are regular cash machine users Total number of transactions THEWAYWEGETCASH_09

Average cash value of withdrawals per cash machine per year Methods of getting cash, other than wages

2,800 £65

2,600 £180 Cash machine withdrawals

£60 s s Benefits at PO counter

2,400 £ n £160 o s

i Passbook and cheque at counter l n l i o

i Plastic card at counter t m 2,200 £140 c s a l Cashback with purchases s

a £55 n w

2,000 a £120 a r r t f d s o h t n

i £100

1,800 e o i u w l £50 l l f i a o v b £80 r 1,600 e £ e g b a r m £60 e u

1,400 v N

£45 A £40 1,200 £20 1,000 £40 94 95 96 97 98 99 00 01 02 03 04 £0 94 95 96 97 98 99 00 01 02 03 04 Average value of transactions Number of transactions Cash machines for convenience More choices The industry recognises that the cash machine Cash machines may be the most popular place network provides an important service to the to get cash but they are not the only place – UK – it is there to provide customers with cash cash over-the-counter is still an important way where they want it, when they want it. for customers to get larger sums and cashback provides people with a convenient way of The figures suggest that people still prefer and topping up their wallet. seek out free cash machines. £155.7 billion was withdrawn through cash machines owned by Withdrawals using cards over the counter banks and building societies – nearly all of in banks and building societies grew from which are free – as opposed to £5.5 billion 69 million to 71 million in 2004 to a total value through independently-owned cash machines. of £23.2 billion. These withdrawals are usually The average number of cash withdrawals per for larger amounts – on average around £325 – day at a cash machine owned by a bank or that many customers prefer not to withdraw building society was 204 whilst, on average, from a cash machine, and where a branch just 19 withdrawals per day were made at each provides a greater sense of security. independently-owned cash machine. The number of card holders taking advantage The rapid increase in the number of charging of cashback in shops has grown in the last five cash machines has not been matched by a years from just over five million to nearly similar increase in their use. There are now eight million. The average value of cashback around 23,000 machines that charge to withdrawals has remained consistently at withdraw cash and though these account for around £24 over recent years, less than half just more than 40 per cent of the network that at a cash machine. they still account for only about five per cent of all withdrawals. And among these, the IADs report that they see a lot of repeat custom from people who are prepared to pay for the convenience. 10_THE WAY WE GET CASH

Fighting cash machine crime

As the growth of cash machines and their use continues, it is perhaps inevitable that this has been coupled with a rise in cash machine fraud. Last year, of the UK total of £505 million in card fraud, fraud at UK cash machines accounted for 15 per cent or £74.6 million, up from £41.1 million – an increase of 81 per cent on 2003. The banking industry is working with a number using the details of chipped cards will of partners including the retail industry, cash immediately be identified as fraudulent by chip machine manufacturers, government and the readers in cash machines and retail outlets. For police, on a wide range of initiatives to make more information visit www.chipandpin.co.uk life far harder for the card criminal. Card Watch But it is not just technological answers that help Card Watch is a UK banking industry initiative to combat fraud. Simple things such as safety zones raise awareness of card fraud prevention. Aimed on the floor besides cash machines are becoming at retailers, police, cardholders and the media, more commonplace, encouraging people to use the service helps to explain the different types cash machines without encroaching on anyone of plastic card fraud in the UK, and provides else’s personal space. information and training on how to prevent them. Also, the banks have an ongoing education In November 2004, during the annual Card programme promoting safe cash machine use Security Initiative, Card Watch concentrated on and advice on how to minimise the chances of raising awareness of fraud carried out at cash becoming a victim of fraud at a cash machine. machines, helping consumers to spot skimming Chip and PIN devices, warning them about ‘shoulder surfing’ and providing tips for keeping cards and card Chip and PIN, the latest global weapon in the details safe. fight against card fraud, has been rolling out in the UK since October 2003 and provides For more information visit www.cardwatch.org.uk increased consumer protection. With 100 million DCPCU (The Dedicated Cheque chip and PIN cards in circulation by the end and Plastic Crime Unit) of May 2005, the new technology is already beginning to make a real difference in the fight This specialist police unit was set up in April against card fraud. 2002 to focus on the organised criminals behind The most visible difference with chip and PIN the huge increases in counterfeit card fraud. cards is that customers will increasingly use Originally jointly funded by the banking industry a four-digit PIN rather than signing when they and the Home Office the banking industry has, shop. This tackles fraud on lost and stolen cards since April 2004, funded the unit in full. head on. The chip on the cards also prevents one Now working across all serious and organised of the major types of fraud that can be carried cheque and plastic crime, including cash machine out at cash machines – skimming or and identity fraud, the Unit has an impressive counterfeiting. Card details held on the chip record of success in identifying, investigating, cannot be copied, and any fake cards produced arresting and prosecuting criminal gangs. THEWAYWEGETCASH_11

The future

Of cash machine users products and services offered by both cash machine providers themselves and third parties. The rise in the number of people using cash machines looks set to continue in the coming Of how we get cash years, with the last two years showing a marked Cash machines will continue to dominate the way upward trend (a rise of between two per cent and we get cash. In 2014 we are forecast to get three per cent each year) after a levelling off in the around £200 billion from cash machines – three- number of new users between 2001 and 2002. quarters of all cash acquired. This is largely due to the rise in the numbers of new Take-up of chip and PIN will increase cash bank or building society account-holders as a result machine use – as people get to know their PINs of the growth in basic bank accounts and direct and use them in shops the process of getting cash payment of benefits into these accounts, rather from a cash machine will also become more than cash over the counter. This has helped to familiar. There may therefore be a move to greater create new plastic cardholders – and consequently cash machine use among current non-users. cash machine users – in two groups with historically lower than average usage; the Cashback is expected to grow to a total value of over 65s and those in social groupings D and E. £8.6 billion over the next ten years – boosted by continued growth in debit card use. Potential Coupled with the increase in holders of plastic developments that may make it a more attractive cards for Electron and Solo accounts – which way of getting cash include chip and PIN – as this allow customers to access only the funds in their makes card transactions more secure – coupled account and do not have overdraft or credit with a new system that would allow customers to facilities – this means more people can access check their balance through a mobile phone. The cash as and when they need it and, in many latter development is being reviewed by LINK and cases, this means that they are able to budget could provide the certainty about the status of any more effectively. account for people wanting to make sure that they Of cash machines will not go overdrawn if they use cashback. The entry of independently-owned cash machines has transformed the face of the ATM estate, and the expectation is for further growth in the number of machines. Cash machines play an important role in providing banking services to the community and are becoming more than just a place to access cash. People can use more and more banking services and other facilities such as mobile phone top-ups and bill paying. In the future other potential service developments could be location-dependent, for instance theatre or cinema tickets at machines located in close proximity to the venue. Increased use of on-screen advertising is also likely for For further information please contact: Mark Bowerman Corporate Communications APACS UK Payments Association Mercury House Triton Court 14, Finsbury Square London EC2A 1LQ Tel 020 7711 6251 Fax 020 7256 5527 Email [email protected] [email protected] www.apacs.org.uk

APACS Plastic Card Information Office Tel: 0870 420 3208 Fax: 0870 420 3252 Email: [email protected]

APACS also publishes a detailed annual booklet The ATM Survey providing additional information and analysis (costing £50.00)