Early last year owners of automated teller machines fought for the privilege of surcharging customer transactions.
Today, some ATM owners are fighting for the right not to surcharge.
Community banks-and some larger banks that lack extensive ATM networks- are banding together in no-fee alliances. They hope the democratic appeal of giving people free access to their money will outweigh the convenience of having an ATM on every corner.
Among the states where bankers are waiving the contentious fees and forming alliances are California, Massachusetts, Kentucky, Michigan, Missouri, and Washington; some in Minnesota are considering it.
The movement is not necessarily a populist rejection of surcharges-the extra fees of $1 or more levied on noncustomers of an ATM's owner. Many bankers who have set up no-fee alliances say they have no ethical or philosophical problems with surcharges-they're just hoping customers won't defect to banks with larger ATM bases.
In California, for example, the No Surcharge Alliance was created in February "as a marketing organization, to help customers find ATMs that don't surcharge," said D. Jeffrey Marrow, vice president of community banking at Union Bank of California, which is owned by Bank of Tokyo- Mitsubishi Ltd.
The alliance's 115 members include banks, thrifts, and credit unions that together own 2,800 ATMs. By contrast, BankAmerica Corp. has 4,200 ATMs in the state, and Wells Fargo & Co. has 2,917.
"We are dwarfed by these folks," Mr. Marrow said. Union Bank has 350 ATMs, he said, while the state's two largest banking companies own about 45% of California's 15,000 machines.
Instead, Union Bank and its partners have a different strategic weapon: Each ATM bears a No Surcharge Alliance sticker that shows a red circle with a slash across the middle.
The program has worked, Mr. Marrow said. Union Bank's ATM volume rose 25% from February through the end of May, and the use of non-Union Bank ATMs by its own customers declined more than 30%.
"People recognize that we're not surcharging," Mr. Marrow said.
But dropping ATM fees is more than a clever customer hook. Indeed, it may be a life preserver for small banks threatened by large competitors.
"They are not fighting for ATM transactions," said Alanna Kellogg, president of The Kellogg Group of St. Louis. "They are fighting for customers."
Yet Ms. Kellogg, a consultant who specializes in electronic banking, wondered how much loyalty banks could foster this way. "There's no doubt that they can retain their existing customer base. The question is whether they can attract enough new customers to make it worthwhile," she said.
ATM surcharging took hold last year after the Plus and Cirrus networks ended their surcharging bans. But consumer groups and legislators have expressed outrage. And Sen. Alfonse M. D'Amato, R-N.Y., chairman of the Senate Banking Committee, has introduced legislation to make surcharges illegal.
Members of no-fee alliances hope lawmakers will notice their efforts. Some bankers view the alliances as a free-market alternative to government regulation.
If legislators are successful, "the large banks will have no one to blame but themselves," said Robert Rose, president and chief executive officer of C.U. Cooperative Systems, a group of 330 credit unions that participate in California's No Surcharge Alliance.
Some bank groups are taking a neutral stance. The Independent Bankers Association of America has elected not to form an alliance, since some of its members surcharge, said Viveca Y. Ware, director of payment systems. Instead, it has chosen to list no-surcharge ATMs on its Web site.
"By going with the Web site, we're providing a member service, one that requires very little maintenance," Ms. Ware said.
Other associations are vocally opposed to surcharging.
Independent Community Bankers of Minnesota has taken a position against ATM fees and is studying the case for setting up its own network.
And two others-the Community Bankers Association of New York State and the Community Bank League of New England-have made statements of their own by joining Cartel, a transaction network in Buffalo that was founded in reaction to high interchange fees imposed by large networks.
Joseph E. Wolfson started Cartel in 1994, aiming to create a small, branded network for bankers and retailers who felt bilked by larger ones. His action struck a chord among people who had misgivings about bank-owned networks and their pricing.
"We're billing ourselves as a no-surcharge network," Mr. Wolfson said. The fees that community banks pay to larger networks "are subsidizing the big banks," he said. "A handful of financial institutions control the networks in this country."
Cartel operates in 48 states, and most members do not charge customers for ATM use.
Donald S. Glass, president of the Community Bank League of New England, said his members strongly oppose surcharging. The league is endorsing Cartel to offer its institutions an alternative.
Surcharges, Mr. Glass said, "are the bait-and-switch that the regionals played on the community banks."
With Minnesota bankers and others considering moves to private networks, the existing regional ATM companies are taking stock of their positions.
The Minnesota bankers now work through Shazam Inc. of Johnstown, Iowa. Shazam has already seen several member banks set up a no-fee alliance, but a separate network might be a different story.
Richard S. Jenkins, Shazam's senior vice president and corporate counsel, described a no-fee alliance under way in Missouri as "a program that the Shazam network is willing to take, as opposed to a creation of a separate and unique network."
The Missouri alliance, Privileged Status, debuted this week in the state's southwest corner.
The alliance was hatched at an ATM conference last September, when two community bank executives brainstormed during a session break about how they could retain customers who were getting hit by fees from larger banks.
Both bankers were concerned that customers might defect to an institution like NationsBank Corp., whose pervasive ATM network charges noncustomers $1 a transaction.
"It's not that we're opposed to surcharges-it's just about making more ATMs available without the surcharges," said Carla Green, vice president of deposit operations at Guaranty Federal Savings Bank, Springfield, Mo.
Ms. Green and Shawn F. Christian, executive vice president of Ozark Bank of Ozark, Mo., were the founding members of the alliance. By August, it will include 30 institutions and more than 100 ATMs, Mr. Christian said.
Meanwhile, some of Shazam's competitors are embracing or considering alliances. Magic Line Inc., the Dearborn, Mich.-based regional network, will introduce ValuConnect to its financial institutions by the end of July. St. Louis-based BankMateis evaluating the concept.
One problem with dropping surcharges, bankers say, is getting the message out to consumers that use of the machines is free. Most ATMs display a patchwork of logos and symbols.
To promote its no-fee alliance, the Massachusetts Bankers Association sends marketing kits to its 215 members. There are statement stuffers, point of sale table displays, and consumer guides.
"The downside of this is that it becomes exceedingly complicated for customers," Ms. Kellogg said.
From the ATM networks' perspective, no-fee alliances make good sense, said Alan P. Pohlman, executive vice president at Carmody & Bloom, a consulting firm based in Ridgewood, N.J.
"You allow them to exist within your structure and operate in a manner they think is proper, and you keep the volume within your own network," Mr. Pohlman said.