Study on ATM Usage Shows That Relatively Few Pay Majority of Optional Surcharges; Most Consumers Pay None; Research Also Reveals That Banking Relationships Are Unaffected
Research findings on consumer usage patterns of automated teller machines (ATMs) where surcharges exist show that a relatively small percentage of consumers pay the majority of the fees, those who do pay choose to at their option, and the vast majority of the public pays no convenience fees at all.
A 1997 study conducted over seven southern and southwestern states by Rice University Marketing Professor Dr. Richard R. Batsell through Analytica, a Houston-based research organization, combined with usage information collected by PULSE EFT Association from its Texas customers, revealed the following:
— Among 1,000 adult consumers, the convenience access fees would have been paid by barely 30 percent.
— Almost 70 percent of adults have never paid such fees.
— About 18 percent of cardholders pay 60 percent of the total convenience fees collected.
— Of those who have paid convenience access fees, only 27 percent say they have paid more than $1. That translates to only 8.5 percent of the total adult sample.
— An overwhelming majority of ATM users, more than 80 percent, say they avoid ATMs where they know convenience fees are charged.
— Nearly 90 percent of ATM users feel they are sufficiently informed by their financial institutions on the ATM fees they are charged.
The research also showed that among those who use ATMs, 61.2 percent of consumers judged the fees they paid to be either “just right,” “a bargain,” or “a real bargain.”
On a question regarding the effect of convenience fees on banking relationships, the study shows that fewer than 2 percent of consumers ever have switched their accounts to another financial institution either solely or partly because of such fees.
The Analytica research was commissioned by PULSE EFT Association, one of the nation’s oldest and largest shared electronic funds transfer networks.
Batsell, who does extensive consumer research on ATMs and point-of sale (POS) installations, said that the findings demonstrate that the public is making informed choices.
“It is evident that the free market is functioning with regard to ATM use,” he said. “The data shows that consumers are clearly aware of their options, and they adjust their behavior when presented with the fees. Those who want to avail themselves of the extra convenience do so with frequency. And the majority who avoid ATMs which impose convenience fees obviously seek out and take advantage of the other options available to them.”
Those choices include the use of non-charging ATMs, the availability of getting cash back with no charge at point-of-sale locations and conventional banking and check cashing options.
Stan Paur, president of PULSE, said that the finding of the mass of empirical data collected by his company surprised him.
“It is understandable that some are concerned about the impact of these fees,” he said. “When our association was advised in a judicial proceeding that PULSE should allow optional convenience fees, we presumed there would be disastrous results for our network.
“Instead, those revenues have fueled the enormous growth in ATM deployment at nonfinancial institution sites which would not be economically feasible without such fees. This includes airports, sports facilities, shopping malls, hospitals, supermarkets and gas stations. As a result, consumers are enjoying unprecedented convenience in obtaining cash almost on impulse.”
Paur said that the growth in ATM deployment is not limited to any one segment of the financial services marketplace. He cites the case of a small town banker who initiated a 50 cent convenience fee to help him turn a money-losing customer service into a break-even proposition. He said that the banker reported to him several months later that the convenience fees had enabled him to install two more ATMs to better serve his rural area customers. Paur noted that the 700-member Independent Bankers Association of Texas has formally endorsed allowing ATM owners to choose whether to levy such fees.
He also pointed out that more than 40 percent of ATMs sold last year were to operators outside the financial institutions industry. Diebold, Incorporated, a leading manufacturer of ATM equipment, estimates investment in technology and facilities of more than $617 million for 1996 alone, with that total approaching almost $2 billion over the past four years.
PULSE, based in Houston, is a not-for-profit association with more than 2,000 members in eight states, ranging from banking giants to independent community banks, credit unions and savings and loans. It serves participants in Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee and Texas with more than 30,000 ATMs and 122,000 PULSE PAY point-of-sale terminals.