War on Cash: Banks Crack Down on Independent ATMs

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

Yesterday’s Wall Street Journal featured an article discussing how banks are clamping down on independent ATMs, Gas-Station ATMs Are a Banking Battleground.

It caught my attention, because I  live in a Brooklyn neighborhood that’s underbanked, with the nearest Citibank a 45-minute roundtrip walk away.

Now, pre-pandemic, I rarely used an independent ATM, as I hate being gouged with unnecessary bank fees. These would certainly be levied if I grabbed cash at a nearby bodega, bakery, or supermarket, paying both my bank for using a non-bank ATM, plus the ATM owner. Prior to the pandemic, I used to ride the subway often and would just make sure I picked up some cash when I passed a Citibank ATM. But now,  I eschew trips that require a subway trip, in favor of local businesses that deliver or hold goods for pick up, or are close enough that I can walk and dash quickly inside

Over to the  Journal:

Dozens of banks had rejected Ann Marie and Dan Ellis when they opened Bank of AmericaCorp. BAC -0.24% checking accounts last February to fund their southern Arizona network of automated teller machines.

In April, the bank closed the accounts. Their money—used to fund around $450,000 in weekly customer withdrawals—was frozen. Branch managers told them to call the bank’s risk and fraud department.

Banks are cutting off small-business owners who run the independent ATMs found in America’s gas stations, bars and bodegas. ATM operators say it is getting harder to find a bank willing to hold the funds needed to keep their machines stocked with cash. The banks that will work with them, ATM operators say, are jacking up their fees.

For banks, it is a simple matter of risk. The sole product of ATMs is cash, which can make them a convenient way for criminals to launder the proceeds of their illegal activities. A bank that does business with unscrupulous ATM owners could face the wrath of regulators for violating anti-money-laundering rules.

Jerri-Lynn here. Is it really risk alone that’s motivating bank decisions? Or are banks taking these actions because they can? After all, the reasons a bank might do so seem obvious:  to force customers to use the banks own ATM network, or to increase pressures to use bank credit cards and payment apps, with the charges for using those services going to banks instead of independent ATMs. More on this point in a moment.

Per the WSJ:

Legitimate businesses—and their customers—get caught in the middle. Independent ATMs serve as a lifeline to people in areas where traditional banks have retrenched. An estimated $90 billion was withdrawn from the roughly 225,000 nonbank ATMs in the U.S. in 2020, according to the latest data from research and consulting firm RBR.

“Basically, our ATM is their bank,” said Ms. Ellis, who, with her husband, built a network of around 100 ATMs during their 21 years in the business. The couple relied on loans from friends and family while they waited for Bank of America to release their money.

NYC Situation

I’ve written before about NYC’s ban on cashless businesses, passed by the City Council in January  2020 to make sure that city residents that lack credit cards can purchase goods and services, despite pandemic-imposed strong pressure towards promoting cash-free transactions. The proportion of city residents without a bank account is estimated as high as 10% IIRC, with the proportion described as underbanked numbering one in five.  Many kids are included in these numbers (see War on Cash: NYC Enforces its Cashless Business Ban and  War on Cash: New York City Businesses Must Accept Cash, City Council Decides). Another motivation for the NYC cashless ban was concern over the security of digital payments and their infrastructure.

Last week, I was marvelling at the opposite phenomenon, a popular local business that has managed to remain cash only, despite pandemic-related pressure to promote going cash-free. Last Saturday, February 12, I was in the mood for a Jamaican beef patty, so I walked the block and a bit from my house to Allan’s Bakery, a family-owned and operated bakery that’s been in business since 1960. Once I arrived, I donned my N95 mask, and joined the socially-distanced queue. On sunny weekend afternoons, even in February, Allan’s fosters a party atmosphere, with an employee acting as a DJ and playing music from street side speakers to entertain its waiting customers. Once inside, I quickly collected a beef patty, two currant rolls, and an order of codfish balls (with not-to-be-missed tamarind sauce). My treasures cost less than $10; if I hadn’t had cash, I could have snagged some from an independent ATM conveniently positioned inside. One reason Allan’s can keep prices low and quality high is it doesn’t fritter away revenues on bank fees from cashless transactions.

The city can – and has – fined businesses that violate the cashless ban. But I don’t think the city alone can mandate that someone, anyone, provide access to ATMS, independent or otherwise, in neighborhoods such as my own, which as I mentioned, lack extensive networks of bank branches.

Federal authorities rather than state or local ones have been involved in regulating independent ATMs, with the Department of Justice jumping into the regulatory weeds here. But that federal intervention was intended to crack down on alleged fraud and abuse – e.g.,  ultimately restricting access to independent ATMs -\- rather than promoting easy, low cost  access to ATM transactions. Not for the first time have I mulled the irony that the phrase “universal banking services” in the U.S. context refers to one-stop shopping for the plethora of banking services, rather than making banking services universally available to anyone who has need for same.

Per the WSJ:

ATM operators were among the businesses that got caught up in the Justice Department’s Operation Choke Point, an investigation launched in 2013 into banks’ dealings with companies seen as more likely to be involved in illegal activity. Rather than go after the companies individually, prosecutors targeted the financial infrastructure keeping them in business, “choking them off from the very air they need to survive,” a department official told The Wall Street Journal at the time.

The initiative ended in 2017, but the account shutdowns didn’t. Banks continued to rely on regulatory guidance that warned independent ATM operators were a higher fraud and money-laundering risk.

These federal policy moves didn’t go unchallenged. Over to the WSJ again:

Late last year, following a yearslong lobbying push by ATM owners that earned the backing of lawmakers from both parties, regulators softened the guidance. Language discouraging banks from working with ATM owners was replaced with an acknowledgment of their role in bringing financial services to underserved areas.

But ATM owners say the new guidance has done little to make their lives easier. Bank OZKrecently shut down deposit accounts of several board members of the National ATM Council Inc., the industry’s trade group, citing risk. Bank OZK declined to comment.

Curt Selman’s account was among them, and it wasn’t the first time. JPMorgan Chase & Co., Regions Financial Corp. and a local community bank had previously cut him off.

“The window is getting smaller, and I just wonder when the music stops who’ll be there,” said Mr. Selman, who now has accounts with Simmons Bank and Veritex Community Bank.

JPMorgan and Regions declined to comment.

The Journal finally acknowledged in the latter part of its article that the banks hands aren’t exactly clean on this issue, because banks and independent ATMs are in competition for custom and customers:

The relationship between ATM owners and banks is complex because the two are also competitors. When people use their debit cards at independent ATMs, the bank that issued the card pays a fee to the ATM’s owner. That interchange fee is set by card networks. ATM owners say their cut of the fee has fallen.

In some cases, banks have put pressure on the merchants that provide space to ATM operators.

Jay Osman, who runs a string of ATMs in Mississippi, said he had to remove a few machines after a local bank told its customers that it would charge them $200 a month for having an ATM in their store.

Banks have piled more requirements on independent ATM operators, citing alleged state and federal regulations as the rationale for so doing. According to the WSJ:

In a December 2020 letter reviewed by the Journal, The Citizens Bank of Philadelphia, Miss., cited “state and federal regulations” that view privately owned ATMs as high-risk and requiring enhanced due diligence by banks as the reason for the charge.

Mr. Osman said he repeatedly told bank employees that the merchants aren’t handling the cash in his ATMs. He said the bank declined to change its policy. It didn’t respond to requests for comment.

After Bank of America shut down their accounts, the Ellises began relying more on another bank they worked with—BMO Harris. The bank told the Ellises they had to hire armored trucks to transport the cash, and it later increased their fees and limited the amount of money they could withdraw. To make up the difference, they opened accounts at a Comerica Inc. branch roughly 100 miles away.

Their banking costs have swelled to about $2,000 a month, up from roughly $400. That includes $600 in rent for office space needed to accept deliveries from the armored trucks, which Comerica also required.

I haven’t noticed any change in the number of independent ATMs in my neighborhood in recent months. But nor do I rely on these machines enough that I would necessarily notice if such independent services became less available. But the WSJ article is a reminder that for cash to continue to be widely used, it’s necessary for people to be able to procure sufficient supplies to conduct their everyday transactions.

Alas, the war on cash continues.

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  1. timotheus

    I tried to buy something at a bakery in Tribeca (lower Manhattan) earlier this month and was told that cash was not accepted “for now.” When I went past the place a few days later, there was a sign on the door saying, “Sorry, WE CANNOT ACCEPT CASH just yet.” The state Office of Consumer Affairs has the photo, so we’ll see if any sort of reminder/citation/enforcement ensues.

  2. lordkoos

    This is all about the big banks removing competition. Does this also affect 7-11 stores and other mini-marts? 7-11 is a very large franchise and a lot of people use cash machines there.

    I noticed this winter that Fred Meyer began charging a fee for cash-back from a checkout cashier which was formerly free.

    The greed never sleeps.

    1. JacobiteInTraining

      Hah, had to happen. Thats often been my go-to to avoid ATM fees, I’ll have to check out my local Freddies, and then the other groceries on new fees for that.

      Of course, since Freddies got acquired by Kroger it was inevitable the crapification would accelerate. I know I know, that happened ages ago but (having grown up in Oregon, and worked at one back in the day) I still use the friendly ‘Freddies’ name, thats a legacy of it being a ‘hometown business’.

      I suppose I long since should have just started calling it ‘Yet another faceless nameless corporate entity’. :/

      1. Punxsutawney

        As a fellow Oregon resident. Yeah, the caprification of “Freddies” has been slow and steady. Since the pandemic started, Kroger has yet to have the shelves stocked, often large gaps in products, though getting better just lately.

        But my big beef is that they took out my Bank’s ATM which was where I often got cash. The bank has closed so many branches, that getting cash now requires time and driving which is quite frustrating.

  3. Henry Moon Pie

    Maybe the banks were behind this in our town.

    It’s actually a pretty tragic story. A neighbor’s childhood friend, now in her 70s, is the owner of the store and relies on it for a living. Her husband came down with Covid and has been in intensive care for weeks. Her own health is lousy.

    Put “crash,” “store,” and “ATM” in your browser and see what pops up. It’s a daily event here, as common in the ‘burbs as here in town.

    1. lordkoos

      Wow. But this type of thing could be easily prevented by installing stout barriers in front of the stores.

      1. Henry Moon Pie

        That’s why the thieves broke in through the back in that Cleveland case.

        Pre-Covid, I was shopping at a local supermarket located in what is considered a gentrifying part of the city. My practice is to withdraw cash from an ATM and pay for my groceries that way. On that particular day, that wasn’t going to work because someone had crashed through the front of the store and stole the ATM.

  4. jr

    Feeling your pain JLS, I had to open a new account when I got to Williamsburg so I only have to walk an hour round trip. Another tax on my time. Most days, it’s the Bank of Bodega with a nice fee attached.

    I wonder what the drug dealers will do…..oh, not the cokeheads in Manhattan who will be fine but for the little folks. Maybe some kind of scripts? Bud-bucks? Dope-doubloons? Jugs of Tide?

  5. ambrit

    Down here, getting ‘cash back’ from a credit or debit card transaction is a popular way of acquiring cash for other ‘exchanges.’ The local Dollar Stores have been charging a “fee” for cash back for over a year now. The other, bigger retail vendors aren’t doing such, but I wander if they aren’t being sneakier than Dollar Store; adding the ‘transaction fees’ to the general prices of the merchandise. Spreading the pain as it were.

    1. Yves Smith

      Yes, I used to do that on those odd occasions when I didn’t want to walk to my not far bank branch (like not wanting to take one extra step in really bad weather or needing to be back at my apt at a time certain). It has been a while so it may have changed, but you made a purchase and used a debit card at a big drugstore or grocery store (part of at least a regional chain), no surcharge, and you could get up to $40.

  6. Andy

    Fun fact I learned while watching a documentary about drug gangs in the Netherlands…in Germany you can buy large ticket items (like cars) with cash and it’s illegal for the authorities to flag the transactions and check up on the buyer. It’s one society where cash is still widely used plus it has very good privacy protection laws, at least when compared to the United States. But I wonder how long this will last in the current climate of creeping authoritarianism?

    1. lordkoos

      Several years ago Spain banned cash transactions of amounts over 2500 Euros. Not sure how they expect to enforce it — buying a car is often more than that amount.

  7. cyclist

    I use a credit union that has no nearby branches, so I do most of my banking via ATMs on the co-op network (I refuse to pay a fee to withdraw my own money). Oddly, most of the co-op network ATMs in my region are located in 7-Elevens, which is actually pretty handy, since these shops are everywhere (for check deposits I need to seek out another credit union that has the rare deposit accepting ATM). I wonder if part of this plan is also to force users of smaller banks and credit unions to switch to one of the big banks or at least collect ATM fees from those users.

  8. lordkoos

    I need to give props to the USAA credit union, they pay for your cash machine withdrawal fees, up to $15 per month.

  9. Heidi's Walker

    Long live credit unions. My credit unions ATM network has many machines in CVS stores and the like.

  10. Slob

    In Japan I have accounts at online banks; the only way to get my cash is via independent ATMs in convenience stores. These being “independent” in that the ATMs are owned by the large convenience store chains, but with organizations that large, I imagine there is an high standard of governance. This outsourcing arrangement seems convenient for the online banks, and they allocate free usage based on bank balance and other factors. So I get better service than I do from traditional bank ATMs.

  11. Dave in Austin

    I think all the bridges and tunnels into NYC from NJ say “soorry, no cash”… we’ll send your plate’s address a bill with a “convience fee” attached. The new I 84 bridge is 100 yards outside the magic “25 miles from the statue of liberty” that defines what the MTA covers.

    1. FreeMarketApologist

      Yes. There are no toll booth operators in the NYC region any more. (and all of the exits off the NY Thruway, I believe). You either have to have an EZPass, or they scan your plate, look it up in some consolidated database of registrations (where did they get that from?!), and send you a bill.

      On the plus side, the delay coming in via the GWB is now less than it used to be.

    2. cyclist

      I was surprised to discover there was no cash option for tolls when driving south on I95 through the Fort McHenry Tunnel in Baltimore. A few weeks later I got a bill for the toll and was even more surprised that there was no ‘convenience charge’ – yet another effing modern day scam. Since I hardly ever use toll roads, I’m not interested in an EZ Pass, so I’m fine with this sort of billing if they aren’t penalizing non EZ Pass drivers.

      1. JBird4049

        In the San Francisco Bay Area, they have gotten rid of all the toll collectors, and it is either an electronic device or a picture of your plate. The only reason they ever gave was that the Golden Gate Transit District (who run the Golden Gate Bridge, the ferry, and buses in the North Bay and the commuter lines) could not afford to have them because reasons. What? Of course, when I had to commute I got an EZ Pass because it saved me about two dollars per toll. I still thought about just paying cash after I got laid off, but then they laid off the collectors.

        I think that they just did not want to use humans and want to give a juicy contract to some friends. Then the state did the same thing for the other bridges. There is now no way to get around the Bay Area with them having yet another way to track you. Aside from the two ferries, there’s only four bridges across, which makes them choke points for tracking people. Maybe if you want to drive like 150 miles or more around the Bay, then there might be a way. But it’s been forever since I went up along the Sacramento River.

  12. jackiebass63

    I used to frequent a bar/restaurant before Covid. It was a cash only business. I was amazed at the number of people that used their ATM machine. I never used it because I refuse to pay a fee to get my own money.Instead I would weekly visit my credit union to get cash. Since my credit cards give cash back , this was the only place I didn’t use my credit card.I always pay off my full credit card balance so I have never paid any interest or fees. I probably make between $600-$1000 each year from cash back rewards.Fortunately because of smart lifetime financial habits I’m able to do this.At 80 I have never paid any credit card interest or fees. Presently I never buy anything I can’t pay for in full.

  13. Wukchumni

    I was recently in a skirmish on the War on Cash @ Palisades Tahoe ski resort (formerly Squaw Valley) where my money was no good, only plastic was accepted.

    So riddle me this, why do they have an ATM machine there?

  14. t hardy

    Citibank has no places to deposit in person on eastern Long Island – 65 miles – between Holbrook and Montauk.

  15. TomDority

    It is the same deal over and over — 1) health care billing fraud volume overwhelmingly done by big actors….enforcement legislation and penalties overwhelmingly against the little guy.
    2)Mortgage fraud overwhelmingly committed by the big guys (as the FBI reported) enforcement, legislation and penalties against the little and innocent guy (even FBI had definition of mortgage fraud changed to prevent enforcement against big guys).
    3)Money laundering ………………….
    4)Foreclosure fraud……..
    5)environmental fraud……….
    7) etc………………………………

  16. eg

    This would seem to be an argument in favour of postal banking (along with its own set of associated ATMs), no? Of course, it being in America where the postal system is being systematically dismantled, I guess I can just add it to the list under market fundamentalism’s “na ga happen” …

  17. LowellHighlander

    Ms. Scofield,

    What about credit unions – aren’t there any in your neighborhood?

    If there aren’t, couldn’t people get one started?

    1. Yves Smith

      You can’t join any old credit union. By charter, they are limited to certain populations.

      Members of a credit union share a common bond, also known as the credit union’s “field of membership.” Many employers sponsor their own credit unions. Most credit unions allow members’ families to join. Many credit unions serve anyone that lives, works, worships or attends school in a particular geographic area.


      And they have tinier footprints than banks, making the “find an ATM” problem worse.

  18. Billy

    Cash, use it or lose it.

    Is there some reason that most people cannot walk into a bank branch and withdraw a decent chunk of cash to spend in local independent businesses”
    F* corporations, we use credit cards with points back in those, if what we want cannot be found in small businesses.

    The cutoff of the Canadian truck drivers account’s by intelligence authorities demonstrates the dystopian state that a cashless society would become.

  19. sharonsj

    I refuse to use an ATM because I refuse to pay to get my own money. I have never in my entire 78 years used an ATM ( a record, maybe?). It’s also why I have squirreled away cash and coins for emergencies…or martial law. America has become capitalists’ heaven where the hoi polloi are squeezed for every penny and then distracted from the looting by a ginned up left/right civil war.

    1. JBird4049

      The problem is all the places, mostly where poor people live, that are banking dead zones. My credit union is really only accessible by car or a two hour round trip by public transportation, which means using ATMs for cash.

      The war on cash. The war on privacy. The growing bank deserts. Civil asset forfeiture as having even only a few hundred dollars in cash has been a justification for taking it. As for thousands…. The denial of banking accounts as well as the various fees for those who have them. The difficulties of having debit or credit cards for some.

      A growing number of people cannot get banking services, which can be expensive to have, and
      the authorities don’t want anyone to use cash, or if they are the police, often steal the money because it might be drug money. I guess go die is the idea?

  20. Still Above Water

    I’ve operated an ATM in my bar for 15+ years. Here’s my experience:

    For the first 9 years or so, I had an account with Bank of the West. Then they told me I had to close my ATM account because it was too much paperwork.

    I went to a local credit union, recommended by my ATM processor who had an account at one of their other branches. They seemed to really want my business, but a day after they opened my accounts, they closed them. I asked why they could handle the other ATM account, and they said it was at the branch manager’s discretion. Their manager thought my account was too much trouble.

    I then went to Wells Fargo (I figured they were desperate), and they were fine for a year. Then they said due to a change in policy, they could no longer handle my account.

    For the last 4 years I’ve been with Chase. I dread the day they change their policies.

    A few years ago, my ATM processor asked their clients to write their Congress critters to ask them for legislation to require banks to accept ATM accounts. There’s definitely tension between the banks and ATM operators. Whether it’s because there’s a war on cash, or just a dislike of paperwork, I can’t say. Probably a bit of both.

    As for the ATM, transaction volume is way down compared to before the lockdowns. People aren’t using cash as much as they used to. In fact, I just bought a bunch of customer-facing Square terminals to speed up transaction times at the bar, because printing and signing CC receipts took too much time.

    Foot traffic is ~45% of what it used to be. If that ever recovers, I estimate the ATM usage will be 25% of what it was. The loss of that income hurts, especially when the bar is barely breaking even. If there’s no profit, I don’t get paid. It sucks not having income for 2 years, and a mountain of debt from being closed for 15 months. I might have to get a real job (not easy at close to 60).

    1. Jerri-Lynn Scofield Post author

      Thanks for sharing this news from the trenches. If I may ask, where is your bar located? If I’m ever in the neighborhood, I’d like to drop in for a drink.

  21. Karen

    Can we imagine gathering people together to your bar – Like George Bailey did in “It’s a Wonderful Life” – to sustain local businesses and the autonomy and friendship they have provided to our communities? Cash only!

    That’s what I think is needed. If you can organize it, I’ll be there, and bring a bunch of friends!

    1. Jerri-Lynn Scofield Post author

      I’d like to be there as well, depending on location and the state of the pandemic. Alas, at the moment, I’m still avoiding all indoor gatherings.

  22. Still Above Water

    Oh, how I’d love to meet some NC folks in meat space! Alas, I need to remain anonymous. I have an ex-employee who cyberstalks me trying to get me canceled, because I 86’ed him (post employment) after an employee and several customers independently said he took advantage of them sexually. Which makes me paranoid about leaving clues to my real world identity. I’ve been commenting on NC using this handle for at least 15 years and I have no idea if anything I wrote would raise the ire of the wokerati, but I’d rather not risk it. My general manager told me I don’t get to have a platform – too many jobs could be canceled if I say the wrong thing. And I see his point. So I voice opinions anonymously, and bland platitudes publicly.

    I really DO appreciate the thought, though! Love you all!

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