War on Cash: UK Cash Deserts

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

Quartz this week reported in Scotland is on the front line in the fight against “cash deserts” on an active battleground in the ongoing war on cash: the increase in the UK of ‘cash deserts ‘ – areas that banks have decided not to serve, so that those who need cash, and wish to withdraw it from their bank accounts, cannot do so.

The UK is on the frontline of the war on cash, with branches being shuttered and banks seeking to convince customers they should embrace lower-cost apps. Over to  Quartz:

An average of 460 cash machines vanished every month in 2018, and the country has fewer than 8,000 bank branches now, down from nearly 18,000 in 1989. Around 1,500 previously banked towns no longer have one.

The angst in these villages and towns shows that a swath of people can’t, or don’t want to, leave the analog world behind, even as the number of ways to manage money online is exploding. And they have a point: Research shows that online finance isn’t yet a full replacement for its physical predecessor. Banks like RBS, Lloyds, and Barclays, meanwhile, are under pressure from impatient shareholders to cut costs, as digital rivals brag about their lack of costly physical branch networks.

In banks’ eagerness to embrace more profitable digital alternatives, they are scrapping branches and ATMs faster than society is ready for. As they retreat, the UK is becoming a laboratory for what the rest of the developed world can expect as financial apps rise and storefronts get boarded up [Jerri-Lynn here: my emphasis].

The cash desert problem isn’t limited to Scotland, as the Telegraph reports in Over 100 rural areas in the UK are ‘cash point deserts’ without a single ATM:

More than 100 rural areas in the UK are “cash point deserts” without a single ATM, research shows for the first time.

The study by consumer watchdog Which? found a total of 123 postcode districts with a combined population of 110,935 people did not appear to contain a single ATM.

A further 116 postcode districts appear to have just one ATM, 37 of which charge a fee. In total there are around 2,900 postcode districts in the UK.

The BBC reports separately earlier this month that deprived areas are losing ATMs at a higher rate than are affluent areas, according to a study by the University of Bristol:

Researchers found two-thirds of the city’s cash machines that began charging between October 2018 and March 2019 were in poorer neighbourhoods.

Dr Daniel Tischer warned “cash deserts” were being created which further marginalised poor areas.

The team added policymakers had to take the most vulnerable into account.

The study showed bank branches and free cashpoints were concentrated in areas of economic activity, such as the affluent neighbourhood of Clifton.

Cash machines in more deprived areas tended to be owned by companies that increasingly charge people to withdraw money. [Jerri-Lynn here: my emphasis.]

To expand further on the research, according to a University of Bristol press release, As cash declines, research shows the most deprived communities are left behind :

New research from the University of Bristol’s Personal Finance Research Centre shows deprived neighbourhoods, often those where people are most likely to rely on cash, are rapidly witnessing the disappearance of their free cashpoints.

The study mapped the cash infrastructure within Bristol – one of the UK’s largest and wealthiest cities, which also has areas with some of the highest levels of deprivation in the country.

Now, I should note, that banks can point to economic factors that determine their decisions not to site  and maintain ATMs in certain areas, thus creating cash deserts. To site an ATM  requires  a bank to incur $25-50,000 in capital costs – with the total amount depending on the sophistication of the machine. Most operators depreciate them over 5 years and run them for 7 meaning they they get two “free” years out of them in terms of hardware costs. This means they spend $5-10,000 each year to cover that aspect.

But the real hit to run an ATM is in maintenance. It’s necessary, at minimum, to replenish the ATM weekly, so that customers won’t find a machine has run out of cash when they visit it. Nor do banks want to lock up huge cash balances in these machines: that would mean they both incur a too-high cost-of-cash hit and that the ATM might pose a tempting  target for thieves.

Usually, the maintenance and management cost is at least equivalent to the capital cost. In really remote places, that management and maintenance cost is obviously higher because it’s a longer trip to load it with cash, do the balancing, do housekeeping jobs like cleaning and sorting out note jams, retained cards etc.

If an ATM is only doing a few hundred dispenses per week, the cost per transaction ends up very steep. Far more than can be clawed back from the card issuer banks.

The bottom line is that it costs money to site and maintain an ATM, and the cost curve is only going to get worse over time.

The Bottom Line

In the UK at least, the cash deserts problem looks like it will only expand, as the economics argue against siting and maintaining ATMS in certain areas, and customers alone are unable to convince their banks to do otherwise.

Where are the regulators?


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    1. Clive

      Yes, this creates economic pressure to keep in-ATM cash balances as low as possible which not only hurts machine availability (they’re more likely to run out of cash and/or be less resilient to peaks and troughs because an unexpected busy day can clear out a machine as can a few big-ticket withdrawals) but also pushes up costs because, rather than filling a machine to capacity, you try to keep the minimum viable balance in the machine so it needs more frequent cash loads. A cash load also needs a trial balance of the cash dispensed c/w card transactions.

      There’s also a higher cost to insure the hardware in high-risk areas. Remote ATMs (those not in permanently staffed premises) are also discouraged as a result of smash-and-grab raids because there’s no-on on hand to raise the alarm.

    2. drumlin woodchuckles

      If there are parts of the ATM machine which are Never Ever touched by anyone trying to use the machine, or reload more cash into the machine, but which would HAVE to be touched by someone trying to steal the machine, simply electrify those parts of the machine so that anyone touching those parts of the machine gets a very severe electric shock.

      Or coat those parts of the machine with a thin mixture-layer of dimethyl sulfoxide and ricin, so that anyone stealing the machine would get a mega-lethal dose of ricin.

      Or put a fragmentation bomb in the machine which would blow the thief up along with itself if such theft were attempted.

      1. Clive

        Illegal in most jurisdictions, unfortunately (or fortunately, depending on your viewpoint). Exploding dye packs are about the limit of what’s permissible.

      2. Oregoncharles

        And so would anyone attempting to work on the machine.

        An unpleasant but non-lethal voltage that can be turned off by maintenance people might be practical.

      3. John A

        I understand that if an ATM is blown up or otherwise smashed open, the paper money is sprayed with an almost indelible dye as are the body parts of the would be thieves.
        Or is that simply bank propaganda to dissuade would be thieves from trying?

        Plus most banks in Britain seem to be switching internally from counters where you can pay in and take out money via interaction with a bank employee, to internal ATMs instead. Most front of house bank staff these days, seem to stand around with an iPad offering to help people learn how to use an ATM or the bank app on their phone.

  1. J7915

    The alternative is to give every customer a cell phone free of charge, maintain it free of charge, and of course ensure that there is 100% power available to transact business. I live in a retail desert, no grocery store within miles, no human contact, neighbors either work or are politically incompatible, MAGA big times. I did not change the neighborhood changed.

    Sci-fi wins again? Reread the story the Machine Stops.

    1. Adam1

      Even with that you’d still find a high demand for cash amongst less affluent communities.
      – You can’t over draw cash.
      – Your available balance might not be correct. “Pending” transactions typically disappears after the transactions posts, but merchants who are slow to process might take a couple days. This allows the “pending” transaction to expire before the actual transaction posts and your available balance becomes incorrect. The actual transaction eventually will post and now you’re possibly overdrawn at $30+ a pop. It’s a tiny portion of payments, but when your on minimum wage one overdraft can easily be 10% of your weekly income which is a risk you don’t want to take regardless of how low the probability is.
      – Electronic transactions aren’t free. Small corner store merchants in communities with little means often wont take electric transactions because there margins are already so thin and unfortunately fraud is higher. Same with landlords – cash or money order/bank check only.
      – When you’re literally trying to keep the lights on it’s easier to negotiate a partial payment with a live person and cash in hand than a website. Plus when the payment is 60, 90 or more days due and today is literally the last day to pay (something)… A) you want the assurance of a live person that you’re OK for another week, month, etc… B) Internet bill pay wont necessarily post today which risks being late and out of electric.

  2. The Rev Kev

    I can see where the banks are going with all this. They are demanding that their customers use mobiles or computers to access their bank accounts for everything. And they are closing bank branches as well as ATMs to push their customers into this digital sheep pen. The nearby rural town here is down to its last bank. For the banks it would be a sweet deal as they have all that money coming in and can also sack tens of thousands of staff that use to work in bank branches.
    But it could backfire that. I was watching a Jimmy Dore film clip where he talks about how money works in China. Guess what. The banks are totally cut out of the picture and so are credit cards. They don’t get a zac on any transaction made. Bloomberg mentioned that if the US went the same way, that the banks there would lose $43 billion annually. And other people who would miss out on this would be issuing banks, payment processors and merchant banks.
    Of course Dore presents how it could go wrong such as Bezos being the one to set up such a payment system and the vulnerability of this type of technology. Still, the idea that the banks are not necessary in the chain of payments is an interesting one. Here is that 9 minute video-


    1. notabanktoadie

      Still, the idea that the banks are not necessary in the chain of payments is an interesting one. The Rev Kev

      Fiat, aka “money”, exists in only two forms:
      (1) physical fiat, aka “cash” (coins and paper bills)
      (2) accounts at the Central Bank, which only depository institutions, aka “banks”, may have.

      So unless a would-be bank replacement chooses to use physical fiat only, it will itself need to use a private bank, since it it may not have an account at the Central Bank itself.

      This is why accounts for all (citizens, at least) at the Central Bank are essential if we are ever to be free of private banks.

    2. drumlin woodchuckles

      In China, the banks are not the government. The government had the power to lose the banks out.

      In America, the banks are the government. The banks are not going to lose themselves out, not so long as they themselves are the core within the elected government containment dome we see on the outside.

      1. notabanktoadie

        How are credit unions substantially different from any other government-privileged private bank except the depositors are owners of it?

        Do credit unions not also extend what is, in essence, the public’s credit but for private gain? And are not the richest still the most so-called credit worthy?

    1. Pavel

      This is clearly an argument for Post Office banking. Of course it will never happen in the USA but it works well in other countries e.g. Japan. France used to have public post office banking but IIRC evil Sarko sold it off to a private company.

    2. Cal2

      Here or in Scotland?

      Ask yourself why couldn’t a U.S. Post Office savings bank be implemented, like it is in Japan?

      Furthermore, why couldn’t such a bank take those savings and pay 2% interest and lend the money to people, via credit cards? The Postal Savings Bank could charge say 4% interest, versus paying 29% to the private credit card companies that are owned by the big banks, which own the fed?

      Speaking of that, why can’t the U.S. Treasury issue credit cards and charge 4% interest, with the profits being for the benefit of the citizenry?

      Yeah, I know, I’m not an economist.

      1. ewmayer

        Indeed – the conservatives are always whining about the post office “losing money” – postal banking seems to be a win-win, serving the underbanked at non-usury rates and still being able to make money so as to be able to self-fund the service. Besides basic low-limit credit cards – increasingly vital in a society where the debt merchants have made so many basic economic transactions reliant upon having a CC – a postal bank could also provide payday lending services, even 1/10th the fees the private usury payday lenders charge would make for a handsome return, likely more than enough to offset the expense.

        The thing about a postal bank, most of the physical and electronic infrastructure overlaps what is needed to provide the above banking services. You have a secure physical site to put an ATM, as the PO already deals with high-value goods, cash transactions and post office boxes … perhaps also the major-felony aspect of robbing a US government facility would make it a less tempting target for e.g. ATM thieves.

        For places lacking even a post office, legislation requiring all merchants larger than a specified size to provide no-fee cash-back-on-purchase services at a reasonable level (basically one which does not drastically increase their cash-on-hand requirements) also makes sense. You’re a major store making money from the community, surely being required to offer what is effectively a non-cost-to-you added customer service is not unreasonable. I’ve been using the local Whole Foods as an ATM for years … need some cash, even when I don’t need any groceries just then, I buy some minimal thing I can always use – say a bunch of bananas – that costs about the amount of an ATM fee, ask for $100 cash back. I buy enough groceries there anyway. So just require all large retailers to offer similar. That kills 2 birds with 1 stone, since it also implies a requirement to accept cash payments.

        1. notabanktoadie

          Giving customers cash back means the stores have less need for safes and armored cars and at ZERO risk due to instant clearing. So it is a net benefit for stores.

          Also, usury is ANY positive interest rate.

          Also, a Postal Bank that lends opens a whole can of worms that banks will exploit to abolish it.

          Instead, let’s just have debit/checking accounts for all citizens (at least) at the Central Bank with Post Offices as local branches and abolish all other privileges* for “the banks” and there will be far less need for anyone, especially the poor, to borrow in the first place.

          *e.g. If the economy needs more liquidity (fiat) than deficit spending alone provides then just distribute the difference equally to all citizens as a Citizen’s Dividend and abolish all other fiat creation by the Central Bank for special interests such as the banks and rich.

    1. notabanktoadie

      Sweden’s Central Bank is testing with plans to introduce its own digital currency: The e-Krona, a digital currency backed by the Central Bank that could accelerate the country’s cashless society. The e-Krona pilot scheme starts in 2019. The Swedish digital currency will be implemented throughout the country in 2021. from https://interestingengineering.com/sweden-how-to-live-in-the-worlds-first-cashless-society

      Otherwise, Swedish citizens would not be able to use their nation’s fiat AT ALL with the abolition of physical fiat and thus their slavery to private banks too obvious to ignore?

  3. marieann

    If the banks want me to use a cell phone to access their services they can damn well supply me with one and pay for it.

    I pay with cash wherever I can and the only reason we pay bills online is because my husband is in charge of it. I follow the X-File(Fox Muldar) theory with my money “trust no one”

    We still write cheques for services.

    1. Cal2

      “they can damn well supply me with one and pay for it.”
      Or an employer, to call at all hours and wherever. If you have a land line, don’t let your employer have your cell number, that is, keep it a secret for friends and family only. Same thing with medical or other commercial services.

      No one can hack your bank account if you only do in-person banking.

      Our bank lobby posters announced “New online banking services coming–sign up!”
      Tellers are obliged to mention it as part of their job, try and foist an ATM or credit cards off on every customer as well.

      Mentioned loud enough for all the staff, and the manager, to hear,
      “I like seeing all of you when I come in. If they try and get rid of you through automation, or cut your hours, my money goes to another bank…”

      Don’t put up with automation. Demand a discount if expected to use it in a commercial setting, such as checking into a hotel by typing your details, signing up etc.


      If they want to make a profit off me in the private sector, they better well provide me with
      service, and decently paid people to provide it.

      1. lyman alpha blob

        Indeed. I worked at a bank at about the same time that “What happens in Vegas stays in Vegas” ad campaign started and I sometimes had a hard time keeping a straight face with customers while looking over their transaction history. The ad people should have added “if you pay cash” because if you use a card, any number of people can see every single purchase you made.

  4. Sound of the Suburbs

    The private sector is there to make a profit.

    The public sector is there to provide a service.

    We seem to have got confused.

    1. lordkoos

      At one time banks provided services in exchange for making a profit. Now they just use your money while paying virtually no interest on it, and provide few services as well. It’s a great argument for state-run banking.

    2. Carla

      The private sector exists to suck us dry.
      The public sector is there to suck from us whatever remains.
      We need to change this.

  5. TimH

    I always pay cash at small family businesses, and use a credit card for corporations… because of the transaction fee.

  6. Irrational

    In Germany, cash withdrawals at the supermarket (of course debited from your card) just passed ATMs in importance. A viable substitute for one function of the ATM, not others.

  7. lordkoos

    It’s difficult to have any sympathy for banks having to maintain and stock ATMs, since those ATMs replaced a whole lot of paid employees in the first place. So replacing banks and bank tellers with robots is still not enough savings for them…

  8. Tomonthebeach

    Who needs cash anyway?

    Poor people for sure and probably crooks who cannot otherwise account for their money. The poor cannot qualify for credit cards, cannot bank online (no bank accounts or computers), cannot use phone aps (no smartphones), and even have to pay to convert their paychecks to spendable cash. Now, they have to hunt to find a merchant who accepts cash. This policy surely seems like a rather heartless attack on people of limited means.

    It seems like the entire banking industry is run by Mnuchin’s cousins – graduates of the Lettemeatcake School of Finance at the University of Missery.

  9. Daniel Tischer

    Thank you everyone for the stimulating commentary here.

    Our research has struck a nerve and policy makers, regulators and the industry are getting in touch asking for more work to be done on this.

    As we say, cash is here to stay and I attended the Cash Summit yesterday in London hosted by Which? which provided a relatively consensual debate on the matter.

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