The Downside of Capping ATM Fees

by Karen Augustine 0

ATM fees periodically fall under regulatoryscrutiny in the United States and abroad. For example, in an effortto expand “no-cost basic banking services” in Canada, the NewDemocratic Party recently proposed a limit of 50 cents onwithdrawal fees at automated teller machines owned and operated bybanks, credit unions, or other financial institutions. Such a limitmight do more harm than good to consumers and the self-servicebanking industry as a whole if it were to be instituted and resultin financial institutions limiting the number of their ATMs innonbranch locations. (The proposal, however, may not apply to themany nonbank ATM machines at convenience stores, restaurants, bars,and other locations.)

Consumers in the United States are increasingly taking advantageof ATMs at nonbranch locations, according to the results of thelatest Mercator Advisory Group Insight Report, Self-Service, ATMs and Other Channels: Rising Use ina Mobile Era, based on the CustomerMonitor Survey SeriesBanking and Channels survey, which was conducted in November 2013with an online panel of 3,003 U.S. adults who had at least onebanking relationship.

Our survey found that ATM use in the U.S. is rising, as 78% ofconsumers surveyed said they used an ATM at least a few times ayear, up from 74% of respondents surveyed in 2012. While nearly allATM users use their own bank’s ATMs, more consumers reported usingthe ATMs of banks they do not do business with (22% of ATM usersdid in 2013, up from 17% in 2011) and ATMs that are not bankbranded (16% of ATM users in 2013, up from 12% in 2012). In fact,24% of ATM users at least occasionally use the ATMs of other banks(“foreign ATMs” in bank parlance) or non-bank-branded ATMs innonbranch locations. The number of users willing to do so is risingas consumers increasingly desire convenience and are now morewilling to pay for it.

While most ATM users still admit that they would do anything toavoid paying ATM surcharges (and certainly find ways to avoidsurcharges), fewer do so (73% of ATM users in 2013, down from 79%in 2012). On the contrary, more ATM users are willing to pay ATMsurcharges for ATM convenience at least occasionally, although theytry to use their own bank’s ATM machines (38% of ATM users did soin 2013, up from 30% who reported doing so in 2012). Nearly 1 in 4ATM users said they are willing to pay an ATM surcharge to use aconveniently located machine.

Our findings show that more consumers are using ATMs, they areusing a wider variety of ATMs especially in nonbranch locations,and they are using ATMs more frequently. ATM convenience, number ofATMs in the consumer’s local area, and the types of transactionsenabled on the ATMS are becoming of increasing importance in newbank selection.

In order to familiarize you to the CustomerMonitor Survey Seriesreports, Mercator Advisory Service is now offering Self-Service, ATMs, and Other Channels: Rising Usein a Mobile Era at a special one-time, introductory cost of$5,000. This 66-page report, with its 28 charts showing surveyfindings, includes demographic trends on ATM use; year-over-yeartrends on use and frequency of self-service, ATM, mobile, tablet,and online banking channels compared to the branch; preferredmethods of getting cash and depositing checks; and consumers’interest in mobile cash access and in-branch videoconferencing forbank transactions or to speak with bank representatives.

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