Please find below CMSPI’s response to the PSR’s consultation request addressing the structure of LINK interchange fees.
ATMs play a pivotal role in the payments ecosystem. They are a vital utility for both consumers and merchants. From a merchant perspective, ATMs serve a number of useful functions, including:
- Cash spending is still the number one competitor to card payments, and ATMs are the main vehicle consumers use to access cash.
- The cost of cash acceptance is similar to the cost of card acceptance for merchants, largely due to the Merchant Indifference Test (MIT) method of POS interchange setting used by the European Commission. However, with scheme fee increases coming in regularly in recent years, the cost of cards is likely to increase above the cost of cash. In turn, this will maintain the relevance of cash.
- On-site ATMs provide merchants with a source of revenue, both directly from a share of the interchange fee and indirectly from an increase in consumer spending.
ATMs require interchange fees to cover costs. In the absence of this fee, ATM deployers need to impose surcharges that are damaging to consumers. Cash usage is higher among vulnerable members of society such as elderly and lower income consumers, so widespread ATM surcharging would be damaging from a welfare perspective. This is what happens in the US, where consumers can be charged upwards of $5 (c£4) per transaction.