Five-pound notes are still a rare offering at cash machines
- 16 March 2011
- From the section Business
The £5 note is made from cotton fibre and linen rag - but finding one in a cash machine is like gold dust.
There are at least 249 million of these £5 banknotes in circulation and the Bank of England has been running a campaign to make them more frequently dispensed.
Yet, figures obtained by the BBC reveal that fewer than 3% of the UK's cash machines dispense fivers - even though the technology is available to do so.
So why does our Pin bring crisp £10s and £20s when all we might want, need, or be able to afford, is a fiver?
Clues to the answer can be found in the grubbiness of the banknotes, their use by shopkeepers for change, and banks ensuring their ATMs do not become empty.
People need not travel far in UK towns and cities nowadays to find a cash machine.
Could John Shepherd-Barron, who invented the cash machine, ever have predicted that the idea he came up with while in the bath would become such a part of everyday life?
His cash machine was the first to be tested, ahead of other patented devices, at a hole-in-the-wall at a Barclays branch in Enfield in 1967.
The idea caught on and by the start of the 1990s, there were almost 20,000 cash machines in the UK.
At the last count there were 63,268 cash machines in the UK connected to the Link network - which covers virtually all of the country's ATMs.
More of less
With more and more people using ATMs, they became a key component in how banknotes entered circulation. More than 70% of banknotes initially reach the public via cash machines, from which £20 notes dominate.
At the end of 2009, the Bank of England's chief cashier Andrew Bailey outlined a problem in a speech at a conference - the Bank was struggling to get fivers into circulation, and those being used were increasingly grubby and torn.
"We have most difficulty getting our low denomination note, the £5, into circulation," he told his audience in Washington DC.
"The main reason for this problem is that few ATMs dispense £5s. The link to quality comes about because once our £5s enter circulation, they stay in circulation and change hands more times before they return into the wholesale cash distribution system for fitness sorting."
In 1990, £5 notes made up nearly 11% of the value of notes in circulation. This has recently fallen to just 2.7% of the total.
So, there were fewer out there, and shopkeepers were using them to pay change rather than cashing them at a bank at the end of the day.
A typical £10 note was checked for quality nine times a year. In contrast, the typical £5 note was only checked one-and-a-half times a year on average.
"We need to see more dispensed so that they are less scarce and therefore they return to cash centres for sorting more often," he said.
Owing to the regularity of use, a £5 note only lasts in circulation for a year before being too damaged to use. The lifespan of a £50 note is usually five years or more.
On top of this, consumers were demanding a mix of notes coming out of a cash machine and in their purses and wallets. They did not want to read an ATM display which said "sorry, only £20 notes are available".
The response from the Bank was a campaign and a target to increase the number of £5 notes reaching the hands of shoppers.
A year ago, it set an aim to raise the proportion of £5 notes dispensed from ATMs from 0.2% of the total value of ATM outflows, to 1.2%.
Large retailers also agreed to give out more fivers in change, and together these would add a further 400 million £5 notes into circulation by 2012.
In October, the Bank's governor Mervyn King, said that he expected the five-fold increase in £5 notes dispensed from ATMs to be hit by this Easter. An update is expected from the Bank later this month.
So why could such an agreement not have come earlier? In 2009, chief cashier Mr Bailey's speech suggested a "good deal of aversion" in the commercial sector to issuing £5 notes from ATMs and to shoppers at the till.
The common arguments against packing more fivers into cash machines included the greater cost to companies that sorted and supplied banknotes.
Moreover, cash machines ran out of notes more frequently if lower denominations were used, it was argued.
After all, the average withdrawal from a bank or building society's cash machine is £67 - which would soon drain an ATM if it only dispensed £5 notes.
Link, which runs the UK's cash machine network, says that switching denominations at ATMs requires software changes and the reconfiguration of individual machines, as well as changes to central systems and processes.
But the Bank says it has proved in a pilot scheme that ATM operators can load £5 notes at minimal extra cost to them, and there is a "strong business case" for doing so.
This was because many ATMs are refilled when they still have a lot of cash loaded inside, so the frequency of refilling need not rise. The cost of updating software is also "fairly small", the Bank says.
During the pilot period, the number of transactions at the ATMs labelled as dispensing £5 notes increased while the number of transactions at other ATMs in the same branch decreased.
Mix of notes
A Link spokeswoman says that the number of ATMs dispensing £5 notes rose from 670 in 2009 to 1,435 by the end of 2010. An extra 350 are planned by the end of March, with "further significant increases" later in the year.
This is still some way from some people's experiences in Europe where, in Belgium for example, bank customers can choose a mix of denominations when they withdraw money from an ATM.
A spokeswoman for the Link network says loading £5 notes could be at the expense of another note, and in busy areas could lead to machines running out of cash quicker.
"That said, at some ATMs it is technically possible to enable the customer to choose the denomination, and it is possible that some ATM operators will consider this if there is evidence of strong customer demand," she says.
"For many customers however, their prime concern continues to be to complete the transaction quickly."
And the response from the major banks on the issue remains relatively lukewarm, although they do place some of their £5 note-dispensing machines in areas where, for example, there is a high student population.
Barclays, home of the first ever cash machine, says it has 600 ATMs in its network that dispense fivers, but has no current plans to increase the number.
Lloyds TSB says it plans to double the number of machines it loads with £5 notes to 200.
HSBC, which took part in the Bank of England's pilot project, announced in September that it would raise its number to 384 in England and Wales, but has not added to this since.
It says its ATMs dispensing £5 notes are clearly labelled, and give out at least two fivers in a combination of notes when customers withdraw between £40 and £100.
Richard Dodd, of the British Retail Consortium, says that there are still times when shopkeepers do not have enough £5 notes.
This costs them time when serving at the tills, and costs them money through charges for the sorting and transport of coins.
Consumers might be increasingly using electronic payments instead of notes and coins, but those at the top of the Bank of England remain aware the quality and availability of banknotes still matters to people a great deal.