There is ongoing discussion – one might say hope – that retail-based cash access is a potential long-term solution for consumer access to cash. We don’t see any real evidence to support this playing out in the community. In this article we outline the problem, how retail cash access – known as cashback, or cash out in Australia and New Zealand – fits into the consumer payment landscape, and why more work is needed to find solutions to cash access.
The problem
The problem espoused by the cash community is that access to cash is becoming increasingly challenging. At the outset, there is research suggesting otherwise, even in countries which are now low-cash economies – for example, in 2023 95.3% of the UK population lived within 1 mile of a cash access point (exc cashback locations), while in 2020 95% of Australians lived within 4.3km of a cash withdrawal point (exc cash out locations). So on the one hand, this seems like a non-issue.
However, with the decline in cash usage, commercial ATM operators are experiencing increasing pressure on their operating and commercial models. A growing number of ATMs are unviable. For example, research presented by Dr Arkadiusz Manikowski at the ATMIA EMEA conference in October 2024 demonstrated that it was effectively impossible to run ATMs in Poland at a profit due to prevailing revenue drivers.
This is important because there has been an increasing trend by banks to rationalise their ATM networks, while commercial operators fill the gaps. We can see this in the UK, where over the past two years ATM numbers have dropped by around 11% (a continuation of a long term trend) – and while commercial ATMs have declined by 5%, bank ATMs have declined by 20%. Looking forward a few years, it is a completely rational decision for ATM operators to withdraw services, increase withdrawal fees, or a combination of both. This will of course perpetuate the problem of cash access, and remove the ability of consumers to choose their payment method.
It is a reasonable expectation that in the short term there is risk of a spiralling of ATM footprints and therefore a material worsening of cash access.
Cashback and consumers
Cashback has been available in many countries for decades. Despite this, we are yet to find a country in which there is either (a) a prevalence of accessing cash through cashback, or (b) an uptick in cashback usage in response to reducing numbers of ATMs. The charts below show the long term history of the key dynamics in Australia. On the first chart, retail cash access hovered around 14-16% of total cash withdrawals for some 20 years, and then dropped to 10-12% after COVID (of a lower withdrawal base, of course). On the second chart, the availability of payment terminals (as a proxy for cashback access) and ATMs shows that, if anything, cashback as a share of total withdrawals has tracked the same way as ATM numbers – where it might be expected to have an inverse relationship.
The rationale from the cash community for cashback to play an important and increasing role in the future is quite obvious:
- Retailers are everywhere, with payment terminals, which creates a massively expanded network for cash access
- Consumers frequent retail locations – in particular grocery stores, which makes access to cash in a retail environment convenient and appealing
- Retail cash access is a much cheaper channel than ATMs – no rent, cheaper device which is already a sunk cost, and most likely a cost set off for cash logistics
The problem is, consumers don’t seem to agree! Despite all of the logic around convenience, and despite the reducing number of ATMs (cash access proximity research notwithstanding), there is just no sign of uptake of retail cash access as an alternative channel.
More work needed
We conclude that, at this point, little if any reliance or expectation can be placed on retail cash access to fill the gap of reducing numbers of ATMs.
What is needed then? A number of things:
- Despite our conclusion on adoption of retail cash access, we agree that if it can achieve wider acceptance it could be an important pillar of sustainable cash systems. Therefore research is needed, specifically focused on consumer behaviour, preference, and choice, in order to understand what the barriers are and how they can be overcome
- In the meantime, changes in the cash system and cash usage can’t wait. Improving the viability of ATM channels to support adequate ATM footprints is critical. This is different by country – in some places the problem is suppressed interchange rates by the major card networks, in others it is bank participation in access/utility networks, while in others the broader cash cycle needs reform, from the wholesale cash system through to cash logistics. Context will point to the actions needed to support sustainability
Cash access is one of the key planks of a sustainable cash system – both a necessary ingredient and a critical deliverable. Micro and macro transformation, supported by informed and objective research, is needed in order to make the right decisions and to get the right outcomes.