Ample margins for ATM owners
The unit costs of running fleets of automatic teller machines receive an airing in the quarterly RBA Bulletin, courtesy of work commissioned by the payments regulator from consulting firm Edgar, Dunn & Company.
Edgar, Dunn estimates costs per ATM transaction in Australia to be 54 cents for large banks, compared with $1.12 for independent owners of ATMs.
Differences in cost are not related to the size of ATM fleets (given some independent owners control many more ATMs than banks), but the rent ATM owners have to pay (a cost not incurred by banks for ATMs attached to branches).
Competition for the best sites for ATMs means the site-owner shares in the revenue of the ATM.
Edgar, Dunn found that site costs per transaction for the industry as a whole increased by 19 per cent between 2008 and 2010, but increased by around 40 per cent for independent owners (firms such as Customers, Cashcard and BankTech).
Operating costs per ATM are also higher for independent owners, since they process many fewer transactions - 1200 per month on average, compared with 6500 per month for an ATM owned by a big bank.
Data on ATM costs may be relevant as Parliament considers a Green Party bill to eliminate ATM fees (albeit only for bank-owned ATMs), though the bill at this stage lacks wider political support.
The Reserve Bank of Australia's review of the ATM sector also summarised survey data from Roy Morgan on the experience of bank customers regarding ATM fees.
According to the survey, 23 per cent of ATM withdrawals incurred a direct charge during the week of the study in late 2010.
Younger people were more likely to pay the fees, as were people in regional areas.
Since direct charging at ATMs came into force in March 2009 there has been a sharp fall in the total number of cash withdrawals from any source, the RBA said. To some extent this was offset by a rise in the use of Eftpos to obtain cash.
The article also confirmed the trend towards a rise in ATM fees. The RBA put the average, in December 2010, of these fees at $2.04, a rise of five cents over seven months.
A more recent survey would put the average fee higher still, given plans announced by several ATM fleet owners to lift their fees to $2.50.
Clarification, published 21 March 2011
In the article on Friday, "Ample margins for ATM owners", the newsletter incorrectly reported that the Edgar, Dunn & Company '2010 Australian ATM Market Study Report' was commissioned by the RBA.
The Reserve Bank of Australia was one of many organisations that purchased the final industry report, but (unlike many industry participants) it did not have any material role in the planning or development of the report, or contribute any data or analysis.
The article also did not highlight one of the conclusions of the Edgar, Dunn report, noted by the RBA in its Bulletin article on Thursday, that, "for financial institutions as a whole, the direct charges generated do not cover the cost of providing their ATM networks."