Reserve Bank proposes getting banks to set up more than a thousand new ATMs or cash services sites in dramatic proposal

Reserve Bank wants those in urban areas to be walking distance from cash services. Illustration / Paul Slater

The Reserve Bank is considering requiring banks to set up hundreds, if not thousands, of additional ATMs and/or cash services sites to ensure people can easily trade using cash.

The regulator made the dramatic proposal in a document released for public consultation today.

It suggested requiring banks to ensure free-to-use cash services were within walking distance of those in urban areas and driving distance of those in rural areas – in most cases.

The Reserve Bank said meeting this standard would push banks to set up more ATMs and branches, as well as pool resources to establish hubs customers from different banks could use to withdraw, deposit and swap cash (i.e. trade in coins for notes).

It said that if banks only set up multi-bank, full-service cash sites, they would need to create 1288 of these.

Currently, there are five such hubs throughout the country that service most bank customers.

If banks met the standard by only working alone, they would need to more than double the number of cash services sites they have.

Currently, there are 2159 bank-owned sites offering partial cash services, including 616 branches and 1543 ATMs.

If the new standard was only applied to ANZ, ASB, BNZ and Westpac, these banks would need to set up an additional 3013 cash services sites.

It would be up to banks to decide how they met the standard, including the extent to which they worked together versus established sites with their own branding.

The Reserve Bank noted there were currently also between 1500 and 1600 ATMs and other sites offering cash services that weren’t bank-owned. Its new standard wouldn’t affect those.

It estimated banks would collectively need to find about $104 million a year to meet its standard – the equivalent of 1% of their combined annual profits.

If banks passed the entire cost onto their customers, the average interest rate charged on a loan would increase by 1.8 basis points. In other words, a rate of 4.5% would rise to 4.518%.

The Reserve Bank believed competition between banks would limit their abilities to pass the cost on. But if they did, the regulator saw this as an “acceptable outcome”.

The Reserve Bank was of the view the benefits of having cash services more readily available easily outweighed the costs.

It pointed to productivity benefits for small businesses, as well as “wellbeing” benefits, derived from people using cash for fundraisers, in social and cultural contexts, to teach children about money, and to keep transactions private.

The Reserve Bank also noted cash was important during disasters and when digital payments systems went down.

In said that in the past decade, New Zealand had lost around 40% of its bank branches, and remaining branches had heavily reduced hours.

As for ATMs, they often offered limited services (i.e. withdrawals but not deposits) and charged users fees.

The Reserve Bank said providing cash services was part of a bank’s “social licence” to operate.

It said research showed 72% of small businesses would be adversely affected if cash was unavailable as a means of payment.

Meanwhile, a survey it did revealed over 80% of adults use cash sometimes, 56% store cash and 8% rely on cash as their sole means of payment.

Speaking to media, the Reserve Bank’s director of money and cash, Ian Woolford, said the regulator would separately consider whether to make it mandatory for merchants to accept cash.

He said the bank was watching how such requirements were working overseas, and would consider the matter “in due course”.

Looking ahead, he couldn’t see a world where cash wasn’t used.

As for a major piece of work the Reserve Bank had done into whether it should issue a digital currency, Woolford said this project had been put on pause, and the bank would instead focus on modernising the payments system.

He expected it to issue a public consultation on this in April or May.

Members of the public have until April 10 to provide their feedback on the Reserve Bank’s cash services proposals.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.

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