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Interchange cut in the U.K. will affect Cardtronics

Cardtronics Inc. expects a $4 million drop in revenues as a result of LINK cutting interchange fees beginning Jan. 1, 2011.

November 2, 2010

Cardtronics Inc. expects a $4 million drop in revenues as a result of LINK, the United Kingdom's ATM network, cutting interchange fees beginning Jan. 1, 2011.

"LINK has announced a reduction in interchange of five U.K. (5p) pence per withdrawal transaction, and based on the number of cash withdrawal transactions that we expect to do in 2010, we would expect that to have about a $4 million negative revenue impact in 2011," Chris Brewster, Cardtronics chief financial officer, told analysts yesterday during the company's third-quarter conference call. Five pence is approximately 10 U.S. cents.

Brewster called the drop in interchange an issue for 2011, but not a long-term one.

"I don't really see it as a long-term issue as interest rates inevitably rise over time," he said. "Under this methodology, interchange in the U.K. also will rise."

Interchange rates are cost-based and are calculated following an annual cost study, which basically equates to the total costs of running the entire U.K. ATM network for the previous calendar year divided by the number of transactions, said Mark Bowerman, a spokesperson for LINK.

"This gives an average per cost transaction and is used as the interchange rate for the following year," Bowerman said. "Every ATM in the U.K. is connected to LINK; therefore, these rates apply to all ATMs and all LINK transactions."

Cardtronics owns Bank Machine Ltd., a U.K.-based ATM ISO. Bank Machine operates a total of 2,715 ATMs, including 875 free-to-use machines and 1,840 pay-to-use non-branch ATMs. Cardtronics, which is based in Houston, is the world's largest ATM ISO based on the number of machines it owns and operates.