IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/10892.html
   My bibliography  Save this paper

Paying for ATM usage : good for consumers, bad for banks ?

Author

Listed:
  • Donze, Jocelyn
  • Dubec, Isabelle

Abstract

We compare the effects of the three most common ATM pricing regimes on consumers’ welfare and banks’ profits. We consider cases where the ATM usage is free, where customers pay a foreign fee to their bank and where they pay a foreign fee and a surcharge. Paradoxically, when banks set an additional fee profits are decreased. Besides, consumers’ welfare is higher when ATM usage is not free. Surcharges enhance ATM deployment so that consumers prefer paying surcharges when reaching cash is costly. Our results also shed light on the Australian reform that consists in removing the interchange fee.

Suggested Citation

  • Donze, Jocelyn & Dubec, Isabelle, 2008. "Paying for ATM usage : good for consumers, bad for banks ?," MPRA Paper 10892, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:10892
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/10892/1/MPRA_paper_10892.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Knittel Christopher R. & Stango Victor, 2008. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-42, January.
    2. Donze, Jocelyn & Dubec, Isabelle, 2010. "The effects of regulating interchange fees at cost on the ATM market," Economics Letters, Elsevier, vol. 107(2), pages 187-189, May.
    3. William J. Baumol, 1952. "The Transactions Demand for Cash: An Inventory Theoretic Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 66(4), pages 545-556.
    4. Mcandrews James J., 2003. "Automated Teller Machine Network Pricing - A Review of the Literature," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-13, June.
    5. James J. McAndrews, 1998. "ATM surcharges," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 4(Apr).
    6. Nadia Massoud & Anthony Saunders & Barry Scholnick, 2006. "The Impact of ATM Surcharges on Large versus Small Banks: Is There a Switching Effect?," The Journal of Business, University of Chicago Press, vol. 79(4), pages 2099-2126, July.
    7. Christopher R. Knittel & Victor Stango, 2009. "How Does Incompatibility Affect Prices?: Evidence From Atm'S," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 557-582, September.
    8. Fumiko Hayashi & Richard J. Sullivan & Stuart E. Weiner, 2006. "A guide to the ATM and debit card industry - 2006 update," Monograph, Federal Reserve Bank of Kansas City, number 2006agttaadci2, March.
    9. Donze, Jocelyn & Dubec, Isabelle, 2006. "The role of interchange fees in ATM networks," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 29-43, January.
    10. Nadia Massoud & Dan Bernhardt, 2002. ""Rip-Off" ATM Surcharges," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 96-115, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Donze Jocelyn & Dubec Isabelle, 2011. "ATM Direct Charging Reform: the Effect of Independent Deployers on Welfare," Review of Network Economics, De Gruyter, vol. 10(2), pages 1-23, June.
    2. Milo Bianchi & David Martimort & Stéphane Straub, 2024. "Interoperability and Quality Provision in Digital Payments," Working Papers hal-04758746, HAL.
    3. Stijn Ferrari & Frank Verboven & Hans Degryse, 2010. "Investment and Usage of New Technologies: Evidence from a Shared ATM Network," American Economic Review, American Economic Association, vol. 100(3), pages 1046-1079, June.
    4. Heng Chen & Marie-Hélène Felt, 2022. "Canadians’ Access to Cash Before and During the COVID-19 Pandemic," Discussion Papers 2022-15, Bank of Canada.
    5. Guerino Ardizzi & Massimiliano Cologgi, 2022. "Business models and pricing strategies in the market for ATM withdrawals," Temi di discussione (Economic working papers) 23, Bank of Italy, Economic Research and International Relations Area.
    6. Donze, Jocelyn & Dubec, Isabelle, 2009. "La tarification des retraits aux distributeurs automatiques bancaires, une revue de la littérature [ATM withdrawal pricing, a survey of the literature]," MPRA Paper 16546, University Library of Munich, Germany.
    7. Stijn Ferrari, 2010. "Discriminatory fees, coordination and investment in shared ATM networks," Working Paper Research 184, National Bank of Belgium.
    8. Donze, Jocelyn & Dubec, Isabelle, 2010. "The effects of regulating interchange fees at cost on the ATM market," Economics Letters, Elsevier, vol. 107(2), pages 187-189, May.
    9. Tobias Wenzel, 2014. "Independent Service Operators in ATM Markets," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(1), pages 26-47, February.
    10. Bianchi, Milo & Bouvard, Matthieu & Gomes, Renato & Rhodes, Andrew & Shreeti, Vatsala, 2023. "Mobile payments and interoperability: Insights from the academic literature," Information Economics and Policy, Elsevier, vol. 65(C).
    11. Hugh Green, 2012. "The Treasury-Reserve Bank ATM Taskforce Report: Would it Pass a Cost-Benefit Analysis?," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 19(2), pages 63-68.
    12. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.
    13. Kopsakangas-Savolainen Maria & Takalo Tuomas, 2014. "Competition Before Sunset: The Case of the Finnish ATM Market," Review of Network Economics, De Gruyter, vol. 13(1), pages 1-33, March.
    14. Kopsakangas-Savolainen Maria & Takalo Tuomas, 2014. "Competition Before Sunset: The Case of the Finnish ATM Market," Review of Network Economics, De Gruyter, vol. 13(1), pages 1-33, March.
    15. Russ Kashian & Richard McGregory & Robert Drago, 2016. "ATM Fees at Black and Hispanic Owned Single Market Banks: A Comparative Analysis," The Review of Black Political Economy, Springer;National Economic Association, vol. 43(1), pages 69-84, March.
    16. Wenzel Tobias, 2013. "Naive Consumers, Banking Competition, and ATM Pricing," Review of Network Economics, De Gruyter, vol. 12(3), pages 271-286, October.
    17. Heng Chen & Daneal O’Habib & Hongyu Xiao, 2023. "How Far Do Canadians Need to Travel to Access Cash?," Discussion Papers 2023-28, Bank of Canada.
    18. Hugh Green, 2012. "Australia's 2009 ATM Reforms: Transparency for Transparency's Sake," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 19(1), pages 5-16.
    19. Markkula, Tuomas & Takalo, Tuomas, 2021. "Competition and regulation in the Finnish ATM industry," BoF Economics Review 8/2021, Bank of Finland.
    20. repec:zbw:bofrdp:2012_032 is not listed on IDEAS
    21. Santiago Carbó-Valverde & Sujit Chakravorti & Francisco Rodríguez-Fernández, 2009. "Regulating two-sided markets: an empirical investigation," Working Paper Series WP-09-11, Federal Reserve Bank of Chicago.
    22. Pedro I. González Ramírez & Leobardo Plata Pérez, 2015. "Análisis teórico de las modificaciones a la regulación de comisiones interbancarias en cajeros automáticos en México," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 30(1), pages 141-178.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Donze, Jocelyn & Dubec, Isabelle, 2009. "La tarification des retraits aux distributeurs automatiques bancaires, une revue de la littérature [ATM withdrawal pricing, a survey of the literature]," MPRA Paper 16546, University Library of Munich, Germany.
    2. Ioana Chioveanu & Ramon Fauli‐Oller & Joel Sandonis & Juana Santamaria, 2009. "Atm Surcharges: Effects On Deployment And Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 613-635, September.
    3. Fumiko Hayashi & Zhu Wang, 2008. "Product innovation and network survival in the U.S. ATM and debit card network industry," Research Working Paper RWP 08-14, Federal Reserve Bank of Kansas City.
    4. Donze Jocelyn & Dubec Isabelle, 2011. "ATM Direct Charging Reform: the Effect of Independent Deployers on Welfare," Review of Network Economics, De Gruyter, vol. 10(2), pages 1-23, June.
    5. Verdier, Marianne, 2012. "Interchange fees and inefficiencies in the substitution between debit cards and cash," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 682-696.
    6. Zhu Wang & Fumiko Hayashi, 2011. "Product Innovation and Network Survival in the U.S. ATM and Debit Card Industry," 2011 Meeting Papers 725, Society for Economic Dynamics.
    7. repec:zbw:bofism:2006_038 is not listed on IDEAS
    8. Snellman, Heli, 2006. "Automated teller machine network market structure and cash usage," Scientific Monographs, Bank of Finland, number 2006_038.
    9. Kopsakangas-Savolainen Maria & Takalo Tuomas, 2014. "Competition Before Sunset: The Case of the Finnish ATM Market," Review of Network Economics, De Gruyter, vol. 13(1), pages 1-33, March.
    10. Stijn Ferrari & Frank Verboven & Hans Degryse, 2010. "Investment and Usage of New Technologies: Evidence from a Shared ATM Network," American Economic Review, American Economic Association, vol. 100(3), pages 1046-1079, June.
    11. Markkula, Tuomas & Takalo, Tuomas, 2021. "Competition and regulation in the Finnish ATM industry," BoF Economics Review 8/2021, Bank of Finland.
    12. Knittel, Christopher R. & Stango, Victor, 2011. "Strategic incompatibility in ATM markets," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2627-2636, October.
    13. repec:zbw:bofrdp:2012_032 is not listed on IDEAS
    14. Tobias Wenzel, 2014. "Independent Service Operators in ATM Markets," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(1), pages 26-47, February.
    15. Bianchi, Milo & Bouvard, Matthieu & Gomes, Renato & Rhodes, Andrew & Shreeti, Vatsala, 2023. "Mobile payments and interoperability: Insights from the academic literature," Information Economics and Policy, Elsevier, vol. 65(C).
    16. Guerino Ardizzi & Massimiliano Cologgi, 2022. "Business models and pricing strategies in the market for ATM withdrawals," Temi di discussione (Economic working papers) 23, Bank of Italy, Economic Research and International Relations Area.
    17. Clare Noone, 2012. "ATM Fees, Pricing and Consumer Behaviour: An Analysis of ATM Network Reform in Australia," RBA Research Discussion Papers rdp2012-03, Reserve Bank of Australia.
    18. Snellman, Heli, 2006. "Automated teller machine network market structure and cash usage," Bank of Finland Scientific Monographs, Bank of Finland, volume 0, number sm2006_038, July.
    19. Jakub Górka, 2011. "Rozwój sieci bankomatów w Polsce a opłaty interchange i surchange," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 7-8, pages 89-112.
    20. Kopsakangas-Savolainen Maria & Takalo Tuomas, 2014. "Competition Before Sunset: The Case of the Finnish ATM Market," Review of Network Economics, De Gruyter, vol. 13(1), pages 1-33, March.
    21. Knittel, Christopher R. & Stango, Victor, 2011. "Strategic incompatibility in ATM markets," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2627-2636, October.
    22. Alessandro Gavazza, 2011. "Demand spillovers and market outcomes in the mutual fund industry," RAND Journal of Economics, RAND Corporation, vol. 42(4), pages 776-804, December.

    More about this item

    Keywords

    Banks ; ATMs ; Interchange Fees ; Welfare;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:10892. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.