Wells Fargo & Co. wowed the competition last week by letting customers start trading and selling mutual fund shares at automated teller machines.

The move by San Francisco-based Wells marks the first time a bank has come up with a way to let customers tap stock and bond funds with an ATM card.

Several banks - Citibank and Fleet among them - already allow customers to trade money-market fund shares at ATMs. But these funds trade at a stable price of $1 per share.

It is considered far more difficult for a bank to handle stock and bond fund transactions on ATMs, because share prices fluctuate daily.

Wells won't let customers make their initial fund purchase via an ATM; that requires a prospectus. But cardholders can buy additional shares, transfer money from one fund to another, or sell shares and transfer the proceeds to a bank account.

Now that Wells has come up with a way to handle bond and equity funds in ATMs, other banks that manage mutual funds are likely to follow suit.

But a prominent industry expert has some words of caution: Look before you leap.

Though the gambit could give banks a slight competitive edge, the costs may outweigh the benefits, said A. Michael Lipper, president of Lipper Analytical Services, Summit, N.J.

"It's an interesting marriage of banking technology and mutual funds," Mr. Lipper said. "But I'm not sure I understand the economics here."

Risk of Many Small Trades

For one thing, bank customers might be inclined to make a lot of small redemptions and exchanges. That could prove expensive, and it's not clear who would bear the costs, he said.

In addition, Mr. Lipper noted, customers may not realize that they may have to pay taxes each time they redeem shares in a mutual fund.

Banks that offer ATM services to mutual fund customers would have to redouble their education efforts.

Other concerns include longer lines at ATMs and perhaps a rise in fraud, Mr. Lipper said.

Wells officials could not be reached for comment, but even Mr. Lipper acknowledged that his reservations probably will not deter other banks.

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