Building a bank on ATM acceptance fees, not interest margins (2001)

Taking a banking licence in order to place machines, not to lend

The heart of this decision can be seen in the fact that the banking licence was obtained not in order to lend but in order to place machines. Borrow ATMs from other banks under a shared arrangement and both the operating hours and the number of units depend on the other side’s circumstances. Hold the licence yourself and you decide which store gets how many machines and when they run. However strange a bank it looked from the financial side, from the side of a company running a store network it was the shortest route to controlling its own equipment. That most of the objections concentrated on “can it gather deposits” and “what will it do with the money” appears to be because people were trying to measure this company by the profit and loss structure of an existing bank.

That said, a design that concentrated income into a single fee held strength and fragility at once. A revenue structure explicable by just two variables — transactions and installed machines — is easy to see in an expansion phase, and it makes investment decisions simple. On the other hand, when the amount of cash in use falls, it reaches its ceiling with nothing to be done. The plateau at roughly 900 million transactions in the year to March 2020 was less a management failure than the appearance of a condition the design had carried from the start. What does a company that handles the taking in and paying out of cash do in a society using less of it — the model established over twenty years left that question standing for the next twenty.