ATMs have been around for almost a quarter of a century, but fees, especially double fees, for using them are a more recent phenomenon.
When ATMs were introduced in the 1970s, they were set up only inside or immediately outside their banks' branch offices. They were seen by banks largely as a way of saving money, by reducing the need for tellers. Even with the relatively expensive computer technology of the late '70s and early 80s, the cost of processing deposits and withdrawals via ATMs proved to be less than the cost of training and employing tellers to do the same work.
To encourage customers to embrace the technology and overcome their trepidations about putting their checks into a machine's slot rather than a teller's hands, banks originally didn't charge customers any fees for using ATMs. (Indeed, in time, some banks started charging customers for not using ATMs, through so-called "human teller fees" - a charge for each time a customer uses a teller for a service that could be performed by an ATM.)
Banks that embraced the ATM profited handsomely, often growing far faster than old-fashioned banks in the effort to get business from ordinary Americans.
At first, a bank's ATMs could only be used by consumers who already had checking or savings accounts with that bank, through the bank’s "proprietary ATM network."
However, by the early 80s, banks began to take advantage of improvements in telecommunications technology and formed "shared ATM networks" with other banks, allowing customers of one bank to withdraw money by using ATMs of other banks. Banks paid other ATM owners "interchange" fees, to cover the marginal cost of the "off-us" transactions by its customers on the owner's machines. Banks paid the network a "switch" fee per transaction, plus an annual "membership" fee, to cover the costs of the network. Originally, these fees were not directly passed onto consumers.
After all, from the perspective of a bank, banks that joined the network could advertise that their customers could get access to their money from far more locations than those banks who didn't belong. Yet, the bank would not only not have to pay for tellers; it wouldn't have even have to pay for the cost of building and maintaining most of the extra ATMs from which customers could acce...
... middle of paper ...
...rile up public opinion even more.
What the future holds for ATM fees is uncertain. What is certain, though, is that even the original promoters of the ATM could not have imagined what a profit machine their invention would be 25 years later.
After all, in how many businesses could you get away with charging money for a service you once gave away, without markedly improving the quality of the service (even the latest ATMs can do little more than the "accept deposits", "transfer money between accounts", and "withdraw up to $300" that the ATMs of the late 1970s could do) . . . and despite the price of the underlying technology having dropped to a fraction of its original cost?
So much for making money the old-fashioned way . . . by earning it.
-- K.D. Weinert
K.D. Weinert is the Planning Director for the Fund for Public Interest Research. He began using ATM machines in 1975, starting with Bay Banks in Massachusetts, which merged with numerous local banks, then merged with Bank of Boston, then merged with Fleet Fleet-BankBoston has one of the most dominant ATM market shares in the country, controlling nearly two-thirds of all ATMs in Massachusetts.
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