If you worry the banks are making squillions charging you those hated $2-plus ATM fees, they’re not. But after the big four banks reported record profits of $27 billion between them for 2012-13, you’d be right to ask; why do they bother?
None of the big four banks break out the fees — charged on transactions at so-called “foreign” ATMs, i.e. not owned by the customer’s bank — in their profit results.
The RBA tracks cash withdrawals at ATMs. Assuming the big four count for roughly 60% of the fees charged, Crikey estimates the big banks between them may collect as much as $400 million. Compared to total big bank revenue of $74 billion, it’s a rounding error: 0.6%, tops.
Crikey asked the big four banks how much they collected in ATM fees last financial year, and what contribution they made to profit. Only NAB, which lifted its charge from $1.50 to $2 per transaction in February, would give us a figure: $18 million (which seems low). NAB say the fees were used entirely to fund ATM operations and the bank made no profit from the fees.
That conclusion is borne out by a 2011 paper by the RBA that found ATM fees charged by banks don’t cover the costs of their ATM network. But nor should they, given their own customers are the primary users of ATMs, and the RBA noted banks can recoup the costs through other account-keeping charges.
Punters hate the fees. Since the Reserve Bank introduced them in 2009, customers have tried hard to avoid “foreign” ATMs. In 2012-13 we pulled $147 billion in cash out of 30,000 ATMs in roughly 794 million transactions (for the nerds, that means the average withdrawal is about $185). Of those, 60% were fee-free “own bank” ATM transactions, up from half before the fees were introduced. The RBA estimates consumers saved themselves some $120 million in fees in the first year of the new policy.
Previously, the operator of the foreign ATM charged our own banks, which passed the cost on to customers (plus a margin). The average so-called “interchange fee” was estimated at $2, and the banks magically alighted on this figure when the transparent direct charges were set. The idea was to encourage competition in ATM fee pricing and ensure the number of ATMs didn’t fall.
But the ATM fees only ever go up: since 2009 there has been no instance of a fee being lowered. The big independents Cashcard and Customers ATM now charge $2.50, and $3 fees are creeping in.
Kirsty Lamont of bank comparison website Mozo.com.au says there can be little competitive pressure on ATM operators when consumers aren’t told the fee charged until they are halfway through a transaction.
“If consumers have no way of choosing which ATM to approach, ATM operators face no pressure to keep fees down,” she said. The fact that bank customers have had to sacrifice convenience and look further afield for fee-free ATMs — the people lining up to take cash out at supermarkets are an example of this — just shows the ATM reforms have been a failure, Lamont says. She called for them to be scrapped, or at least for upfront transparency to be introduced.
Greens MP Adam Bandt has campaigned strongly on the issue, moving an unsuccessful private members’ bill in 2010 that would have forced the banks to provide essential financial services at an affordable cost, and calling for a cap or ban on ATM fees.
The no-armed bandits are not a risk-free proposition: pay-wave and other technology means we rely less on cash. Banks are investing in “smart ATMs’ or “intelligent deposit” machines that can take deposits — cash, coin and cheque — without the clumsy envelopes and delayed processing of the old days.
Analysts defend the fees in principle, saying banks aren’t charities and should be able to charge non-customers for providing a service at ATMs. But it’s a question of price: 20 cents, not $2, would be more reflective of the unit cost of batched-up interbank transactions, they say.
Next week there will be more precise figures for 2012-13 from the Payments Consulting Network, which will release its annual “Australian ATM and Branch Automation Market Study”. The network’s boss, Mangala Martinus, says ATMs are a low-margin business, including for the independent operators, and the big winners are the landlords — the shopping centres, clubs and hotels.
We’ll keep you posted.