As several banks test the consumer response to higher automated teller machine fees as they attempt to make up for lost revenue in other areas, their efforts may be creating problems for ATM independent sales organizations.
ISOs are already squeezed by declining ATM use and shrinking ATM interchange revenue, Bryan Bauer, president of ISO Kahuna ATM Solutions in Bloomington, Ill., said.
Higher bank-imposed ATM fees for noncustomers are unlikely to trickle through to ATM ISOs, and such fees ultimately would dampen ATM use, Bauer said.
"Cardholders would not pay [such high fees], and ATM volumes would plummet," Bauer said.
ATM fees are just one revenue source banks are exploring to make up for the lower debit interchange they face under a cap proposed by the Federal Reserve Board and required by the Durbin amendment to the Dodd-Frank Act.
But as banks challenge that proposal, ATM ISOs are eager to see a separate aspect of the Durbin amendment remain the same: its network-routing rules.
Besides capping debit interchange, the amendment would require merchants and acquirers to choose from at least two different card networks for routing payments. That provision would enable ATM ISOs a choice of more payment networks, some of which might provide for higher interchange rates and charge lower fees.
"Right now, ISOs, as transaction acquirers, are at the complete mercy of the networks," Bauer said. "Having the ability to choose from at least two unaffiliated networks is at least a move in the right direction."
Legislation introduced this week seeks to delay implementation of all aspects of the Durbin amendment.
JPMorgan Chase & Co. is testing a new $5 surcharge fee assessed to noncustomers withdrawing money from its ATMs in Illinois; the bank is conducting a similar test of a $4 fee in Texas.
JPMorgan Chase did not comment on the test, which would represent a significant jump from the $3 fee most banks charge noncustomers withdrawing money from their ATMs.
JPMorgan Chase is not alone in experimenting with new fees for various services. TD Bank Financial Group and PNC Financial Services Group Inc. recently announced that their customers will have to pay a foreign-ATM fee when withdrawing cash from other banks' ATMs. TD Bank previously provided its customers free access to other banks' machines, and PNC reimbursed certain customers when they used other ATMs.
Bank of America Corp. executives in 2010 said the bank this year would roll out a "new account structure" that included new fees for basic services. B of A said it was testing an "emergency cash" option that generates a $35 charge when customers exceed their balances when withdrawing cash from B of A ATMs.
More banks may introduce new fees for basic services to offset revenue that could be lost if the Federal Reserve's proposed cap on debit card interchange takes effect as planned in July, observers say.
The proposed 12-cent cap has met with stiff resistance from banks, and lawmakers are working to postpone the final rule's planned implementation to 2012 or later.
