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PAYING FOR ATM USAGE: GOOD FOR CONSUMERS, BAD FOR BANKS? -super-

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  • JOCELYN DONZE
  • ISABELLE DUBEC

Abstract

We compare the effects on welfare of the three most common regimes for pricing shared ATM transactions: (i) free usage, (ii) foreign fees, and (iii) foreign fees and surcharges. Paradoxically, banks' profits decrease each time banks set an additional fee while consumers' welfare is higher when ATM usage is not free. Surcharging boosts ATM deployment and makes consumers better off if travel costs to reach cash are high. Our results are consistent with recent empirical works and also shed light on the Australian reform that consists in removing the interchange fee. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

Suggested Citation

  • Jocelyn Donze & Isabelle Dubec, 2009. "PAYING FOR ATM USAGE: GOOD FOR CONSUMERS, BAD FOR BANKS? -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 583-612, September.
  • Handle: RePEc:bla:jindec:v:57:y:2009:i:3:p:583-612
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    References listed on IDEAS

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    1. 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, September.
    2. 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.
    3. William J. Baumol, 1952. "The Transactions Demand for Cash: An Inventory Theoretic Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 66(4), pages 545-556.
    4. Donze, Jocelyn & Dubec, Isabelle, 2006. "The role of interchange fees in ATM networks," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 29-43, January.
    5. 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.
    6. Nadia Massoud & Dan Bernhardt, 2002. ""Rip-Off" ATM Surcharges," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 96-115, Spring.
    7. 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.
    8. Fumiko Hayashi & Richard J. Sullivan & Stuart E. Weiner, 2006. "A guide to the ATM and debit card industry - 2006 update," Monograph, Federal Reserve Bank of Kansas City, number 2006agttaadci2, Jan 17.
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    Cited by:

    1. 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.
    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. Tobias Wenzel, 2014. "Independent Service Operators in ATM Markets," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(1), pages 26-47, February.
    4. Hugh Green, 2012. "Australia's 2009 ATM Reforms: Transparency for Transparency's Sake," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 19(1), pages 5-16.
    5. Hugh Green, 2012. "The Treasury-Reserve Bank ATM Taskforce Report: Would it Pass a Cost-Benefit Analysis?," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 19(2), pages 63-68.
    6. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.
    7. Stijn Ferrari, 2010. "Discriminatory fees, coordination and investment in shared ATM networks," Working Paper Research 184, National Bank of Belgium.
    8. Kopsakangas-Savolainen Maria & Takalo Tuomas, 2014. "Competition Before Sunset: The Case of the Finnish ATM Market," Review of Network Economics, De Gruyter, vol. 13(1), pages 1-33, March.

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