EclectEcon

When ATMs were first introduced over 30 years ago, financial institutions encouraged their own customers to use them, hoping to reduce teller costs. And for the most part this change has been successful.

When I was in England last summer, I was both pleased and surprised to notice that the financial institutions there all (at least all that I used) had official-sounding notices on their screens, telling people that they did not charge fees for using their ATMs. I could withdraw cash pretty much anywhere and not be charged for the service.

That's weird, isn't it? I was doing something, using a service, that used scarce resources (restocking time, interest costs for the cash in the ATM, depreciation of the machine) but I wasn't paying anything to cover those costs. I didn't bank at those institutions. I (and most of us from Canada who were there) was just receiving a freebie at the expense of the stockholders of those institutions. At the time I liked it, but I figured there must be legislation requiring these kind people to treat us so generously. It just didn't seem to me that zero transaction charges for ATM use would emerge in a competitive, profit-maximizing equilibrium.

And yet politicians continue to try to win votes by telling banks they should give away the ATM service. From the January 26th Nat.Post (courtesy of Jack, no link though),

Finance Minister Jim Flaherty is demanding Canada's banks explain why they charge fees to customers for using automated bank machines.

Mr. Flaherty said yesterday he has raised the question of scrapping the fees with the banks, and he is awaiting their response.

Bank customers use the machines, also known as automated teller machines or ATMs, for more than a billion transactions each year. Customers are charged for some of those transactions — typically there is a fee of $1 to $2 for withdrawing cash from a machine owned by a bank at which the customer does not have an account.

... Mr. Layton said the NDP will press for changes to the banking laws to eliminate the fees.

Why don't these politicians just come right out and say what they mean:

The banks earn profits and we want to redistribute those profits to our constituencies.

Is there some way to force an RSS feed from this blog to these politicians? Here is an excerpt of what I wrote on this topic earlier [see here and here]:

Where did we obtain the idea that we are entitled to no-charge ATM services? ATM hardware is expensive, and so is replenishing the machines. Banks usually provide ATM services for their own customers at no charge, as a way of attracting and retaining customers, but why do we think they should provide these services at no charge to everyone else?

... [P]eople's use of an ATM from another bank or using an independent for-profit ATM service is a convenience. But we do have choices:

* We can pay for most purchases with our debit or credit cards
* We can walk or drive a few extra blocks to a place with lower ATM fees.
* We can plan ahead and get more cash when we are at our own bank or at a no- or low-fee ATM.

In other words, we do have choices. We may not like the inconvenience of the remaining options, but it just plain silly to promote the idea that we have no choice.

We have enough choice that it is unlikely the chartered banks are monopolistically exploiting their ATM users.

For more, see this at Gods of the Copybook, which says, in part,

On a perhaps obvious sidenote, does it strike anyone else as absurd that people complain about these fees? ATM machines don't exactly spring from the ground ready made and filled with multi-hued cash, ready to be dispensed. Does it not seem at least a little reasonable that banks should not be subsidizing the financial activities of their competitors' clients?

Again, from the Nat.Post:

"Mr. Layton said that customers in the United Kingdom are not charged these fees," Mr. Protti [Cdn Banking Association President] said. "However, he should realize that services are not delivered for free. There is a cost to providing banking services. Looking at one service in isolation does not take into account that the costs to provide it are recouped through higher costs for other products and services."

Update #1: One of the costs of operating ATMs is fixing/cleaning them after people take out their frustrations and anger on them. See this [h/t to King]

Update #2: For a taste of real William Jennings Bryan-type populism and how much some people seem to detest or envy bank profits, see the comments to this same posting at The Western Standard.