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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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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10892.

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Date of creation: 16 Sep 2008
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Handle: RePEc:pra:mprapa:10892

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Keywords: Banks ; ATMs ; Interchange Fees ; Welfare;

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  1. Knittel Christopher R. & Stango Victor, 2008. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-42, January.
  2. Mcandrews James J., 2003. "Automated Teller Machine Network Pricing - A Review of the Literature," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-13, June.
  3. James J. McAndrews, 1998. "ATM surcharges," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 4(Apr).
  4. 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.
  5. 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.
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Cited by:
  1. 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.
  2. Degryse, Hans & Ferrari, Stijn & Verboven, Frank, 2007. "Investment and Usage of New Technologies: Evidence from a Shared ATM Network," CEPR Discussion Papers 6592, C.E.P.R. Discussion Papers.
  3. Donze Jocelyn & Dubec Isabelle, 2011. "ATM Direct Charging Reform: the Effect of Independent Deployers on Welfare," Review of Network Economics, De Gruyter, vol. 10(2), pages 1-23, June.
  4. 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.
  5. Tobias Wenzel, 2014. "Independent Service Operators in ATM Markets," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(1), pages 26-47, 02.
  6. Carbó-Valverde, Santiago & Chakravorti, Sujit & Rodríguez Fernández, Francisco, 2009. "Regulating two-sided markets: an empirical investigation," Working Paper Series 1137, European Central Bank.

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