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ATMIA wants ATM operators treated the same way as merchants

MasterCard, operator of the Cirrus ATM network, raised network fees by 260 percent and reduced the interchange large-card issuers would pay non-bank ATM owners for such transactions by 62 percent. Visa, operator of the Plus ATM network, also implemented similar, but less drastic changes several years ago.

April 11, 2011

 
The ATM Industry Association (ATMIA) wants ATM networks treated the same as merchants who offer cash back at the point-of-sale when customers pay for purchases with their debit cards, ATMIA wrote in a letter to the Federal Reserve Board.

The Federal Reserve Board is writing the final regulations for implementing the Electronic Funds Transfer Act (EFTA), which is included in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The rules, which will affect routing of debit-card transactions, are scheduled to be published later this month. Although Dodd-Frank does not specifically mention ATM networks, ATMIA members feel that it is up to them to influence the Federal Reserve Board to write rules that are favorable to the ATM industry.

The ATM Industry Association wants a subsection of the Electronic Funds Transfer Act, which prohibits network exclusivity and limits network-routing restrictions to merchants, to apply to ATM networks as well.

ATMIA argues that non-bank ATM networks, such as store owners, are merchants that accept debit cards, and for a fee, provide convenient access to cash. Cardholders' ability to withdraw cash from ATMs benefits merchants because consumers spend the funds with retailers to purchase products and services, said ATMIA.

"We urge you to clarify that a payment-card network includes an ATM network and a merchant includes an ATM operator," Mike Lee, CEO of ATMIA, wrote in a February letter to the Federal Reserve Board of Governors.

If the Federal Reserve Board accepts ATMIA's argument, the association believes ATM networks should have the same ability merchants would have under the legislation to route debit-card transactions over the least expensive electronic-funds transfer network. 

The association said it would reduce ATM operators' transaction costs and thereby optimize consumer access to cash at the lowest possible cost; ATMIA wants the regulations to offer at least two unaffiliated ATM networks on each card with ATM functionality.

"Enabling this greater degree of choice in routing would benefit consumers, small-issuing banks and the economy," Lee wrote.  "It would create the same economic incentives in the ATM industry that would be created by the point-of-sale industry--an incentive to lower transaction costs, thereby reducing upward pressure on price."

In his eight-page letter to the Federal Reserve Board, Lee writes that MasterCard Worldwide and Visa Inc., the two card networks and the world’s two largest ATM-network operators, have imposed network routing restrictions that force non-bank ATMs to route transactions onto their dominant networks. The ATM Industry Association represents 200,000 non-bank ATMs or off-premises ATMs in the United States. Visa and MasterCard also operate point-of-sale networks in stores.

"At the same time, these dominant networks have increased the fees they charge ATM operators and significantly reduced the amount of ATM interchange paid to operators," Lee wrote. "This double blow has resulted in higher ATM transaction costs, creating upward pressure on consumer fees. In addition, it has resulted in fewer ATMs being deployed and has even led to the removal of a number of deployed ATMs."

Lee cited as an example that MasterCard, operator of the Cirrus ATM network, raised network fees by 260 percent and reduced the interchange large-card issuers would pay non-bank ATM owners for such transactions by 62 percent. Visa, operator of the Plus ATM network, also implemented similar, but less drastic changes several years ago, he said.

Lee added, “And because they [MasterCard and Visa] dominate the industry, the networks can do so without fear of losing volume. Therefore, it is no surprise that these networks have been signing exclusivity agreements with issuers and imposing routing restrictions that force ATM operators to route onto certain networks even if it is not beneficial to the ATM operator and store owner to do so.”

Lee urged the Federal Reserve to implement the routing rule this year so the ATM industry can address the policies that have been imposed by Visa and MasterCard.

The ATM Industry Association agrees with the Federal Reserve Board that the legislation's regulation of interchange transaction fees does not apply to ATM interchange because that interchange is paid by issuers to ATM networks for providing customers convenient access to cash; whereas, POS [point-of-sale] interchange is paid by merchants to issuers. Interchange, along with surcharge fees, is a key source of revenue for ATM networks.

The Federal Reserve Board understands that "limiting ATM interchange would create an incentive to increase the convenience fee charged to consumers," Lee wrote.

He urged the Federal Reserve to implement the routing rule this year so the ATM industry can address the policies that have been imposed by Visa and MasterCard.

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ATM Industry Association (ATMIA)

The ATM Industry Association, founded in 1997, is a global non-profit trade association with over 10,500 members in 65 countries. The membership base covers the full range of this worldwide industry comprising over 2.2 million installed ATMs.

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