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Paying for ATM usage : good for consumers, bad for banks ?

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  • Donze, Jocelyn
  • Dubec, Isabelle

Abstract

We compare the effects of the three most common ATM pricing regimes on consumers’ welfare and banks’ profits. We consider cases where the ATM usage is free, where customers pay a foreign fee to their bank and where they pay a foreign fee and a surcharge. Paradoxically, when banks set an additional fee profits are decreased. Besides, consumers’ welfare is higher when ATM usage is not free. Surcharges enhance ATM deployment so that consumers prefer paying surcharges when reaching cash is costly. Our results also shed light on the Australian reform that consists in removing the interchange fee.

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Paper provided by University of Toulouse 1 Capitole in its series Open Access publications from University of Toulouse 1 Capitole with number http://neeo.univ-tlse1.fr/2448/.

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Date of creation: 2009
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Publication status: Published in The Journal of Industrial Economics (2009) v.57, p.583-612
Handle: RePEc:ner:toulou:http://neeo.univ-tlse1.fr/2448/

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Web page: http://www.univ-tlse1.fr/

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  1. Nadia Massoud & Anthony Saunders & Barry Scholnick, 2006. "The Impact of ATM Surcharges on Large versus Small Banks: Is There a Switching Effect?," The Journal of Business, University of Chicago Press, vol. 79(4), pages 2099-2126, July.
  2. Nadia Massoud & Dan Bernhardt, 2002. ""Rip-Off" ATM Surcharges," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 96-115, Spring.
  3. Christopher R. Knittel & Victor Stango, 2009. "HOW DOES INCOMPATIBILITY AFFECT PRICES?: EVIDENCE FROM ATM'S -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 557-582, 09.
  4. Knittel, Christopher R., 2004. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," Santa Cruz Department of Economics, Working Paper Series qt4z54r2s3, Department of Economics, UC Santa Cruz.
  5. James J. Mcandrews, 2003. "Automated Teller Machine Network Pricing – A Review of the Literature," Review of Network Economics, De Gruyter, vol. 2(2), pages 6.
  6. James J. McAndrews, 1998. "ATM surcharges," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Apr.
  7. Donze, Jocelyn & Dubec, Isabelle, 2008. "The effects of regulating interchange fees at cost on the ATM market," MPRA Paper 10893, University Library of Munich, Germany.
  8. Ramón Faulí-Oller & Ioana Chioveanu & Joel Sandonís & Juana Santamaria-Garcia, 2007. "Atm Surcharges: Effects On Deployment And Welfare," Working Papers. Serie AD 2007-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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Cited by:
  1. Donze, Jocelyn & Dubec, Isabelle, 2010. "ATM Direct Charging Reform: the Effect of Independent Deployers on Welfare," TSE Working Papers 10-162, Toulouse School of Economics (TSE).
  2. Donze, Jocelyn & Dubec, Isabelle, 2010. "The effects of regulating interchange fees at cost on the ATM market," Economics Letters, Elsevier, vol. 107(2), pages 187-189, May.
  3. Donze, Jocelyn & Dubec, Isabelle, 2009. "La tarification des retraits aux distributeurs automatiques bancaires, une revue de la littérature
    [ATM withdrawal pricing, a survey of the literature]    ," MPRA Paper 16546, University Library of Munich, Germany.
  4. Santiago Carbó-Valverde & Sujit Chakravorti & Francisco Rodríguez Fernández, 2009. "Regulating two-sided markets: an empirical investigation," Working Paper Series 1137, European Central Bank.
  5. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.
  6. Ferrari, Stijn, 2009. "Discriminatory fees, coordination and investment in shared ATM networks," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/253172, Katholieke Universiteit Leuven.

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