RBA wants to see price competition in the ATM market

The Reserve Bank is not satisfied that there has been genuine price competition in the ATM market since its direct charge reforms took effect in March last year.

The chief manager of the RBA's payment policy department, John Simon, said the transparency of direct charging had made a difference, with a fall in the number of "other ATM" transactions and a fall in the number of transactions overall.

There is evidence that people are also moving to alternatives, with an increase in cash out at eftpos.

Speaking at the ATM Industry Association conference in Sydney yesterday, Simon said: "These are good things. People are making rational decisions. Consumers are paying $120 million a year less in fees."

Simon said consumers made a distinction between ATMs where transactions were free and those where there was a charge, but they did not appear to be making a distinction between different levels of charges.

"At the moment the issue for the consumer is whether there is a charge or not. The level of the charge is not so important."

Simon said that, based on this finding, it was unlikely that there would be much price competition in the ATM market in the short term.

One of the RBA's goals for its ATM reform program was to introduce price competition into the market. There is a possibility of further regulatory intervention if it feels the current reforms are not achieving that goal.

Simon said: "You want pressure on price. You want to see prices driven down."

The most common direct charge is $2, with some charging $2.50 and some (most notably National Australia Bank) charging $1.50.

Industry participants at the conference agreed that consumers were not sensitive to price variations. Customers chief executive Tim Wildash said his company had experimented by advertising a $1.50 charge on some machines (its standard charge is $2). Inexplicably, volume fell on those machines.

ANZ head of ATM banking Danielle Curry said customers tended to be habitual users. "They like to use one machine near home and one near work. When direct charging came in they moved into the fee bucket or the no-fee bucket."

Simon said greater consumer price sensitivity would evolve with time. He said this had been the experience when credit card surcharging was introduced.

He said the RBA was happy with other developments that have followed the introduction of direct charging. There has been a dramatic fall in the number of balance inquiries at ATMs.

There has been a six per cent increase in the deployment of ATMs since March last year. Independent ATM companies are putting machines in locations that would have not been economic without direct charging.

Simon said: "Consumers have better access because there are more machines in more locations."