Paying for atm usage: Good for consumers, bad for banks?

Abstract

We compare the effects on welfare of the three most common regimes for pricing shared ATM transactions: (i) free usage, (ii) foreign fees, and (iii) foreign fees and surcharges. Paradoxically, banks' profits decrease each time banks set an additional fee while consumers' welfare is higher when ATM usage is not free. Surcharging boosts ATM deployment and makes consumers better off if travel costs to reach cash are high. Our results are consistent with recent empirical works and also shed light on the Australian reform that consists in removing the interchange fee. © 2009 Blackwell Publishing Ltd.