‘It’s obscene’: Should ATM monopolies really charge $3 per transaction?

Sunday, 22 September 2024

Until recently, Naenae had two free ATMs. Now they’re gone, and locals are forced to pay through the nose if they want to access cash. Virginia Fallon investigates.

A birthday present, some pocket money, and a second-hand table: if New Zealand is indeed a cashless society, someone’s forgotten to tell Naenae.

On Thursday morning, it’s all go on Everest Ave. Cars fill the parks outside the shopping strip, a group of teenagers tuck into hot chips, locals greet each other, and a busker tries to drown out the construction din from the aquatic centre being built across the road.

It’s a busy, noisy and friendly background as over the space of 90 minutes, more than 30 people try and fail to withdraw their money from the Lower Hutt suburb’s only ATMs.

“I had a bit of a panic but I definitely have the funds,” says Fiona Charles, after she’s issued only $20 of the $100 she wants.

“Now I’ve got to pay for a bus to the mall which is going to take ages. It just doesn’t seem very fair, does it?”

Today, almost everyone who tries to use the ATMs says much the same thing. Most of them get nothing due to a lack of cash in the machines; a few only receive a portion of what they want, and others refuse to pay for what was recently free.

Because here’s where insult gets added to injury.

Not only are the ATMs faulty; they also charge $2.90 per transaction. Whether you’re withdrawing $20 or $200, that fee is the same - meaning you could be pinged a whopping 14.5% transaction fee.

“It’s ridiculous,” says Jaimaine, who doesn’t give his last name, and refuses to pay through the nose for cash. “It’s hitting a low-income area where it hurts; $3 might not sound like much but it’s a cheap loaf of bread.”

So how did we get here, where the only way Naenae locals can get cash is to pay a surcharge that doesn’t apply in the next suburb over, and what does it tell us about New Zealand’s unequal access to banking systems?

In the past 20 years or so, the number of bank branches has dropped by more than a third, while the number of ATMs in Aotearoa has almost halved.

Some might argue that’s to be expected, with the majority of Kiwis now banking online, and increasing talk of a cashless society - but Ian Woolford, director of money and cash at the Reserve Bank of New Zealand, says we’re not there yet.

“About 8% of New Zealanders are wholly reliant on cash either because they’re unbanked or have cognitive issues.

“People often think that’s just old people… But everyone gets old, people have points of vulnerability at different stages in their lives for different reasons.”

Although NZ’s cash circulation reached over $8 billion this year, nearly double that of 2014, Woolford says accessing it is getting worryingly harder - especially in emergencies.

The recent global Crowdstrike outage saw thousands of Kiwis suddenly unable to pay for necessities, and resulted in official advice to keep cash on hand for disasters both natural and technical. Sage advice in theory, but where are we meant to get it?

Back in Naenae, 70-year-old Mark Williams has to walk to the next suburb or catch a bus to withdraw cash from his fortnightly $700 pension. Sometimes the dairy will let him take out a tenner because he quite literally can’t afford to use the ATMs.

“If I have $20 left I can’t get it out because of the fee. If I’ve got $40 left - dreams are free - I can only get $20 which is the minimum withdrawal.”

Inequality expert Max Rashbrooke says the surcharge is “just another example of how expensive it is to be poor in New Zealand”.

“If you’re charging people $2.90 for something that is otherwise provided for free in other communities … that is exploitative at the very least.”

Rashbrooke points out that with a core benefit being about $350, a $3 withdrawal charge can be “a huge percentage” of someone’s income.

“Poorer families are often badly served by the market because they don’t have purchasing power, so markets tend to abandon them more quickly. That’s where you can start to get predatory capitalism.”

All this brings us back to how Naenae lost its free ATMs in the first place.

Until very recently there were two: one from Westpac and the other from Cardtronics, both set in the outside wall of a retail property owned by Ian Lang.

Lang says he was made a “very good offer” by ATM provider Next Payments for the two sites and, under “time pressure”, ultimately took it.

“We made a commercial decision as both insurance and rates have gone up insanely but our tenant is on a fixed rental, so how else do we pay our rates bill, [which is] now 20% more than last year?”

Helen Ryder, Westpac NZ’s managing director of consumer banking and wealth, says the bank is hoping to have a new fee-free ATM in Naenae in the next few months.

“We were informed by the landlord in July that they’d leased the site to Next Payments and we were not given the option to renew.”

Enter Next Payments, which, while charging what may seem to be exorbitant prices, does know how to recognise a gap in the market.

On Thursday afternoon, Tim Wildash, the Australian-based company’s executive chairman, says he’s not sure how his machines came to replace the fee-free ones in Naenae.

“There’s something unusual about this case in Naenae but in 95% of cases the banks remove the ATM or close the branch.”

That’s when his business steps in to provide a service, borrowing at 6% from the same banks that withdrew theirs, and its one with costs that have to be passed on, he says.

And although that might be tough to swallow, Next is needed.

During the Cyclone Gabrielle response, the company’s ATMs were “vital to meeting the cash needs of residents of the East Coast, particularly Ruatoria, Tokomaru Bay and Tolaga Bay”, says the Reserve Bank.

“They also proposed, prepared and helped transport to Hawke’s Bay temporary ATMs for use in Wairoa, although these weren’t installed in the end due to faster recovery of power and data networks to existing ATMs.”

As for their fees? Wildash says he feels for customers, but money doesn’t come cheap.

“Delivery of cash went up 30.5% in two years, and the interest rate on our loans - the money that goes into the ATMs - that’s up 20.5% over the last three years.”

Even so, he says this is only a short-term issue because a couple of banks want to offer fee-free transactions through the Next machines, as long as the branding is changed. (That’s because the company also services hotels, clubs and gaming, and the financial institutions don’t want any association with alcohol or gambling.)

“So we might have a Next ATM at one venue, and we'll call it ATM Cash at another one.”

In the meantime, he points out surcharges are everywhere, including his recent restaurant dinner bill for seven people; Wildash paid AU$822 (NZ$987), and while the duck, rabbit and lamb were delicious, he reeled at the cost of using payWave.

“I was shocked with the surcharge of $12.16.”

That sort of surcharge is well beyond budget for Naenae local Chris Ropata, who gets $250 a week and worries not so much for himself but other locals who need cash.

“We have a lot of sick people, a lot of kuia and kaumatua who can’t just get in their cars or walk to another machine. I feel so sad for our people here.”

Hutt City councillor Andy Mitchell says those locals are quite simply being exploited.

“It’s outrageous that people on low, fixed incomes have to pay close to 15% to withdraw $20 of their own precious money in cash.

“Locals are rightly questioning why these machines are all that’s available in Naenae now, and whether the same applies to more affluent suburbs.”

And it seems it doesn’t. What’s happening in the Lower Hutt suburb is a microcosm of a national issue affecting people in poor and remote areas.

In Raetahi, Ruapehu District Council deputy mayor Vivienne Hoeta says the only ATMs are owned by Next and currently charge a $ 2.75 fee that will soon rise to $2.90.

“That’s money people could be utilising for something else. We’re a low socio-economic area… People don’t have cars to drive 15 minutes to use another machine.

“A rural community is not a cashless society. Everyone relies on it to barter, or spend at the markets; there’s a flow on-effect and it isn’t fair.”’

That flow-on effect was well in play in Naenae last weekend, says Wayne Paaka, from Team Naenae Trust, a group providing social and community services.

“We had our multicultural day down here: heaps of stalls, hundreds of people, and nobody could get their money out.

“Why would people come back when they can’t sell or buy? How do you revitalise a community where people can’t get cash?”

Economist Cameron Bagrie says it’s important to remember that, in most cases, these problems are occurring because banks are withdrawing from communities.

“You have to be fair: everything costs and they'll be making economic decisions.

“There will be instances where services don’t stack up, or ‘use it or lose it’, but sometimes it’s not about the money, its about delivering on your social licence into society.”

Bagrie says financial literacy skills tend to be lower in poorer areas, and the removal of bank services both endorses and makes it even harder to escape the status quo.

“Banks have to provide pragmatic solutions because otherwise players are going to see opportunities. When there are gaps in necessities, people are going to get fleeced.”

While Bagrie means that broadly, he does say Next’s surcharge “seems nuts”.

“You've got to ask, does it really cost $3 per transaction to provide that service, because that just seems obscene. Questions need to be asked.”

And finally on Friday afternoon, almost on deadline and after questions were asked: another email from Wildash.

“Pleased to advise that after discussions with a few people Next Payments can provide a fee-free ATM (one of the existing two) within 7 days…

“A good result for the people of Naenae.”

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