RBA predicts fewer ATMs, warns of end to cheques

JOYCE MOULLAKIS

JUNE 3, 2020

The Australian

Changes to payment behaviour linked to the COVID-19 crisis will prompt a significant cut to ATM networks and may sound the final death knell for cheques, Reserve Bank of Australia assistant governor Michelle Bullock says.

Ms Bullock also warned that unless banks stepped up efforts to allow retailers to direct payments to lower-cost EFTPOS networks over those for credit cards, the central bank could force the change.

“So far, the (Reserve) Bank has not mandated that acquirers explicitly offer least-cost routing to all their merchants. But it remains an option that will be considered in the (payment system) Review,” she told a Morgan Stanley webcast on Wednesday titled “The Evolution of Banks and Payments”.

“We are talking with merchants to understand their experience with payment costs through this period. We will also be considering how transparency of the cost of the payment plans offered to merchants could be improved.

“Ultimately though, if market forces are not generating competition to lower the cost of debit card payments, we may need to consider lowering the benchmarks that serve as a cap on average interchange fees.”

Banks charge interchange fees to each other in the background, when payments are made, depending on who the cardholder and retailer use as their financial institution.

Ms Bullock also talked about sharp COVID-19 changes in payment habits as consumers avoided cash, which she expects to accelerate a reduction in the number of ATMs available domestically.

She said ATM withdrawals in April tumbled 30 per cent from the month before and were more than 40 per cent down over 12 months.

“With cash withdrawals declining, there will be further pressure to consolidate ATM networks.

“The industry had been already considering this issue over the past couple of years but the changes induced by COVID-19 will make this more urgent,” Ms Bullock added.

“I expect that there will be action on this issue more quickly now. But there are still some people that prefer to use cash, so consolidation of the ATM network will need to be managed in such a way that it does not disadvantage certain parts of the population that still rely heavily on cash.”

The big banks have talked about the pandemic leading to a reassessment of their branch numbers and ATM networks, amid big shifts since March.

In April, ANZ noted it was experiencing record volumes in areas like home-loan refinancing applications and financial markets activity, but dramatic falls in ATM and branch transactions.

On cheques, Ms Bullock said the acceleration of the decline in usage would “may well” spell the end of their use.

“Use of cheques has been on a steep decline for the past 20 years, both in terms of number of cheques written and the value,” she added.

“In April, the value of cheque payments was more than 40 per cent lower than 12 months earlier, compared with annual rates of decline of around 20 per cent in previous months. And the level of cheque usage has now fallen to such low levels that there is an active discussion about the future of the system.”

The RBA is also assessing whether it should allow surcharging on buy-now-pay-later options, given that players did not allow retailers to recoup the cost of the instalment networks from their customers.