Banks offloading ATMs to third party suppliers is bad news for Aussies, experts say

Six years after the big four banks ‘dropped’ ATM fees for non-customers, experts are warning of a trend that’s hurting Aussies’ pockets more than they may realise.

Aussies’ wallets are bearing the brunt of banks offloading cash machines to third parties that charge high withdrawal fees, experts have warned.

Just six years after the big four banks declared they’d scrap cash-out fees for customers of other banks, a trend of partnerships with independent ATM suppliers means hefty withdrawal costs are back.

As recently as April, Westpac announced it signed an agreement with currency management service provider Armaguard to manage 7000 ATMs across Australia.

That followed Armaguard’s purchase of 1300 of ANZ’s cash machines in 2020.

Banks are increasingly doing deals with third parties for their ATMs.

These moves benefit customers of the partnering bank, who can withdraw cash for free, but they come at a cost for the majority of consumers, according to the University of New South Wales’ Associate Professor of Finance, Mark Humphery-Jenner.

“ATMx (owned by Armaguard) is now increasingly replacing ANZ machines. Unless your bank has a fee waiver agreement with ATMx, they will charge you $3 to withdraw your money,” Prof Mark-Humphery-Jenner said.

“The real reason for cutting ATMs is financial. They are a convenient service for customers, but they do not directly generate revenue. And, they cost money. So they look like an easy expense to cut or outsource”.

Prof Humphrey-Jenner said the replacement “impacts everyone”.

“Paying another $3 to withdraw cash is a pain. Presumably, lower income earners notice this more,” he said.

Westpac has partnered with two separate ATM providers since 2019.

“This is not to suggest that higher income earners should pay higher fees to cross-subsidise other people’s withdrawals. But it does seem to especially harm people who would make smaller withdrawals more often and would most notice the fee.”

Prof Humphrey-Jenner said customers could avoid the fees by withdrawing at bank branches, which still waive fees for each other’s customers — though with local branch numbers falling, this comes with its own challenges.

Big banks and the ‘great Australian ATM rip off’

One fed-up Australian took to Reddit to vent about the increase of independent ATMs with huge fees, accusing the big four banks of pulling the “bait and switch”.

“Remember back in 2017 when the banks made a huge fuss about how they decided to wave ATM fees for transactions from other banks?” they wrote in a viral post.

“Fast forward to 2023, and the banks pulled the bait and switch by offloading almost their entire ATM networks to private operators like Armaguard.

“Now ATM fees at ATMs that used to belong to the big banks are charging up to $4 to withdraw money or even do a bank balance.
“It is actually now cheaper to get money from one of the cheap third party ATMs that are in your local corner shop or pub that we used to only go to when desperate.”

The post struck a chord online.
“I haven’t used an ATM in years. If I need cash, I get it from the Coles, Woolies, or servo register as cash out with my purchase,” conceded one social media user.

“My local (Commonwealth Bank) branch closed and ripped out the ATM from the wall, now the nearest ATM / branch is double the distance,” added another.
Others suggested the Reddit user switch to Macquarie Bank or ING, both which waive ATM fees from all machines.

ANZ also signed a deal with Armaguard. Picture: NCA NewsWire/Damian Shaw

Covid “super-charged” cashless society, less people using cash

According to the Australian Prudential Regulation Authority, the number of ATM machines across the country halved between 2017 and 2022.

A new report from the Australian Banking Association showed that over the past four years, a huge 98.9 per cent of bank interactions in Australia were digital.

As the number of cash transactions and ATM machines continue their steep decline, Associate Professor Christoph Breidbach from the University of Queensland’s Business School said fees will likely keep rising for those who still want or need to withdraw cash.

“It’s expensive for banks to run ATMs,” he said.

“Now we have a Covid and post-Covid society, which has supercharged a cashless society because people were afraid to touch cash. An increase in fees for ATM transactions is the logical consequence, because there are fewer and fewer people using them but the cost (to run them) is the same.

“The problem is it fundamentally and disproportionately affects vulnerable people … or the ‘unbanked’ population.”

Economics Professor at Charles Sturt University John Hicks agreed it made sense that more banks were offloading ATMs as they become less profitable.

He said that in turn, third parties will charge fees as they also need to make money.

“However, one might expect this will only hasten the demise of ATMs as those (consumers) currently continuing to use currency rather than cards for their transactions make the switch to cards to avoid the fees,” he said.

There’s debate over just how quickly ATM machines will continue to decline.

ATM machines not going anywhere

Prof Mark-Humphery-Jenner was less convinced ATMs would disappear any time soon.

“Banks sometimes claim that ATMs are unnecessary,” he said.

“But, this is disingenuous. If cash were so disliked, and ATMs so unnecessary, why do third parties think they can make a profit by running ATMs?”

A Westpac Group spokesperson told news.com.au their agreement has “expanded access to fee-free cash for our customers to almost 7000 locations nationwide”.

“This agreement means Westpac, BankSA, Bank of Melbourne and BankSA customers can access fee-free cash at ATMx by Armaguard, Precinct, and Westpac Group branded ATMs across the country”.

As well as its Armaguard deal, the major bank offloaded parts of its ATM network to cash management provider Prosegur (Precinct) in 2019.

A spokesperson for Commonwealth Bank, which has sold 14 per cent of its ATMs to Armaguard over the past few years, said it operates the “largest bank-owned ATM network in Australia”.

An NAB spokesperson said it had not privatised any of its ATMs.

And an ANZ spokesperson said its customers “have fee-free access to 2,600 ATMs operated by ANZ and atmx across Australia”.

“Our customers also have fee-free access to thousands of additional ATMs operated by other major banks”.

Armaguard was contacted for comment.