ATM fees and bank reform


A small part of John Durie’s article in today’s Australian caught my eye:

The noise over banks was a classic example, with the lunatic fringe backing policy designed to entrench the powerful big four at the expense of the smaller banks — two cases in point being abolition of ATM fees and banning exit fees.

Sorry, there is a proposal to abolish ATM fees? This is nuts! The system of ATM fee regulation now in place in Australia requires transparent fees. It has been successful in improving competition, helping small independent ATM providers, helping banks and other parties form ‘networks’ with free access, and other good things for consumers. I have mentioned this before.

Making ATM fees illegal will simply kill off the small independent ATM providers. Unless it includes an ‘all ATMs must accept all cards’ rule, it may also hurt the smaller deposit taking institutions. They will have small ATM networks of their own and will have to rely on the larger banks who will have no incentive to give them ATM  access unless they have to (or unless they get a very hefty transfer from the small institution). Of course, an ‘all cards’ rule together with a ‘no fee’ rule would kill off any incentive to roll out any new ATMs. Why would I if I can just free ride by law on other institutions ATMs?

Let’s hope Durie is correct and it is just the lunatic fringe at work here.

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