Article

Is your bank missing the payoffs of surcharge-free ATMs?

Fees are the No. 1 reason why consumers change FIs, and ATM fees are especially despised. Here are two ways to cut ATM fees and encourage consumer stickiness.

April 21, 2015

ATM Marketplace is pleased to introduce new blogger Karl Kraus, from Cardtronics. Karl will be writing a regular blog on ATM branding and related issues.

by Karl Kraus, vice president of product management, financial services, Cardtronics

"I shouldn't have to pay a fee to access my own money," says the ATM user year after year.

And yet, for the eighth consecutive year, the annual checking survey by Bankrate.com reported a new high for the average cost to an accountholder for going outside their bank or credit union's ATM network.

Pegging the average total cost (surcharge fees plus foreign fees) at $4.35 per transaction in 2014, BankRate.com found both surcharge and foreign (aka out-of-network) fees to be on the rise.

On one hand, there are real costs associated with providing ATM access, especially ubiquitous ATM access in convenient retail locations — thus the fees. On the other hand, accountholders have been crystal clear about their aversion to these fees, sometimes to the point of finding a new financial institution. In fact, a 2012 Javelin study found that fees constitute the No. 1 reason (selected by 33 percent of respondents) why people change banks.

In the face of this dilemma, many financial institutions have begun searching for a middle ground, opting to allow for a certain number of eventuallyfree out-of-network ATM transactions through a fee reimbursement program.

First, the FI chooses not to charge a foreign fee. That's step one. Then comes step two, the surcharge fee. This the cardholder must initially pay, but the FI promises to reimburse the cardholder later. Banks and credit unions offering such programs typically set a cap on total reimbursements per account per month.

While the cardholder might appreciate the gesture, fee reimbursement programs still carry the disadvantage of reminding the cardholder of the fees they might be incurring, and reimbursement caps could be inconvenient for heavy ATM users.

Fortunately, there are ways for FIs to increase cardholder convenience by providing ready access to ATMs — while at the same time reducing the fees their customers are encountering at those ATMs.

ATM branding

Many cardholders use out-of-network ATMs because they are more conveniently located than those of their home bank. Convenience stores, pharmacies, grocery stores, and other high-traffic destinations are already part of many people's daily routines; the availability of an ATM in one of these stores means one less stop on their way home, since there's no need to stop at the bank just to use the ATM.

Many of these retail ATMs are available for branding through programs that prominently display the sponsoring institution's marketing at the machine while providing surcharge-free access to that FI's cardholders.

Partnering with an ATM provider on branding initiatives can increase cardholder satisfaction while keeping the FI's brand top of mind.

Surcharge-free networks

Another option for FIs looking to increase convenience and lower fees for cardholders is through participation in a surcharge-free network, of which there are several across the country.

Network membership provides an institution's cardholders with nationwide (or even international) surcharge-free ATM access allowing even the smallest community bank or credit union an ATM network that's on par with networks of even the largest banks. And, unlike surcharge reimbursement programs, cardholders don't have to pay a fee up front and then wait for their FI to pay them back.

 Consumers don't like fees and will go out of their way to avoid them — even to the point of switching financial institutions. Surcharge-free access, through ATM branding or surcharge-free network membership, can be key to cultivating stickier cardholder relationships through a potent combination of greater convenience and fewer fees.

As VP of product management for financial services at Cardtronics, Karl Kraus is charged with guiding and executing product strategy and new product development. He is also a cofounder of LocatorSearch, a cloud based location services platform.

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