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More financial institutions apparently are offering surcharge-free ATM
access to debit cardholders, according to the Pulse 2008 Debit
Issuer Study released Monday.
But the study's conclusions on that one particular point are unscientific
because researchers have no earlier data to support Pulse's
claim of an increase, says Tony Hayes, director of Financial
Services at Oliver Wyman Group, a New York-based management-consulting
firm, and the report's author.
"We don't have a historical data point," Hayes says, "it's more anecdotal because
there is a lot of interest in surcharge- free ATM programs." The
anecdotal evidence, however, should not raise questions on the study's overall conclusions.
"The 2008 Debit Issuer Study provides new data and comparsions
to results of the 2007 Debit Issuer Study, released February
2007," Pulse said in a statement. "This comprehensive survey offers
a revealing look at debit issuer performance, debit card trends and the latest
technologies and service offerings."
Debit card issuer participation in surcharge-free ATM networks is a trend in the debit card industry, observers say. "Although growth in debit use remains strong, debit card issuers are broadening their electronic payment services to
include new payment devices, targeted cardholder perks, such as surcharge-free programs, and greater levels of service," Cindy Ballard, Pulse executive vice president, said in a statement.
Oliver Wyman surveyed 62 financial institutions for Pulse, a Houston-based electronic funds-transfer network owned by Discover Financial Services.
The institutions, which include large banks, community banks and credit unions, own 46,000 ATMs and collectively issue more than 74 million cards, or 28% of the debit cards issued in the U.S., according to Oliver Wyman.
Of the participating issuers, 56% have cards that are in surcharge-
free ATM networks.
Among credit unions, 84% offer surcharge-free ATM access for transactions made by the issuer's debit cardholders at ATMs owned by other financial institutions, the report says. For example, if a credit union belongs to a surcharge-free ATM network, the credit union's cardholders are not assessed surcharges or foreign fees. Cardholders who withdraw cash from a competing bank's ATMs pay a surcharge fee, which averages $1.78, but Bank of
America, operator of the nation's largest bank-owned ATM network, charges $2.50 per transaction in Chicago.
As punishment for withdrawing cash from a competitor's ATM,
the cardholder's bank or credit union charges the cardholder a foreign
fee, which averages $1.25 per transaction.
Consumers withdrawing cash from a competitor's ATMs pay an average of $3.03 in fees per transaction, says Greg McBride, senior financial analyst at Bankrate.com, a consumer Web site. Rising fees have spawned keen interest and support for surcharge- free ATM networks, Hayes says.
Forty-eight percent of financial institutions reimburse cardholders'
surcharge fees. The compensation, however, applies to a limited number of
customers, the report says. Of the institutions that reimburse
cardholders, 45% limit monthly transactions at out-of-network
ATMs.
The number of transactions made at ATMs is not increasing,
and financial institutions do not want to tack on more fees to discourage
ATM use, Hayes says. ATM transactions are flat partly because consumers are making more against transactions at the point of sale. Point-of-sale transactions grew 14% last year and are expected to grow 12% this year, Hayes says.
A more educated public also is suppressing ATM transaction
fees. After years of hearing consumer groups plead with consumers to make cash withdrawals at their own banks' ATMs to avoid fees, cardholders finally are listening and acting.
ATM&Debit News has reported that the four largest surchargefree
ATM networks–Allpoint, Credit Union 24, Co-op Network and MoneyPass–are growing for a number of reasons.
First, community banks and credit unions for example, are joining surcharge-free ATM networks to reduce bank depositors' and credit-union members' fees during challenging economic times (ADN, 7/17).
Second, surcharge-free ATM networks also help credit unions and community banks that individually may have a small number of ATMs become part of a much larger ATM network.
For example, Tallahassee, Fla.-based Credit Union 24, and
Allpoint, the Bethesda, Md.-based surcharge-free ATM network, formed an alliance, creating a combined surcharge-free network for credit unions of 50,000 ATMs (ADN,7/17).
Allpoint operates 32,000 surcharge-free ATMs, Credit Union 24 surcharge-free ATM network consists of 18,000 ATMs. Surcharge-free networks offer two business models to prospective clients.
Financial institutions can pay the networks per transaction ormonthly, which covers all of the card transactions. "More financial institutions chose the latter because of the fixed costs," Hayes says.
