STRATEGIC PARTNERS
March 13, 2003
OTTOWA, Ontario -- Rising ATM surcharges may suppress competition in the Canadian financial services industry, according to a report in the National Post.
Martin Glynn, chief executive of HSBC Bank Canada, said that ATM surcharges levied by most of the big banks discourage Canadians from opening accounts with smaller financial institutions that don't have large ATM networks.
"If you're a customer of the Royal Bank, who controls 40 percent of the ATMs in Canada (with 4,500 machines), are you going to move your account to Canadian Tire Bank when you have to go to the Royal and pay $1.50 every time?" Glynn said.
CIBC became the first Canadian bank to surcharge at its ATMs last November, followed by Royal Bank in December. Other banks have since followed suit.
Smaller banks and credit unions cannot afford to pay surcharges on behalf of their customers to offer free access to the ATMs of bigger banks, Glynn said, adding that Ottowa should offer smaller players affordable access to the ATM networks of big banks to foster competition.
"When the government set out to promote long-distance telephone competition, they didn't force new companies to put their own wires up, but were permitted to use the infrastructure that existed," Glynn said in a recent speech.
The issue of ATM surcharges will become even more important as the use of traditional branches declines and surcharges continue to proliferate the industry, he said.
The big banks do not buy Glynn's argument.
"A client likely wouldn't stay with any given financial institution to avoid ATM surcharges, as our research has shown that this is not a factor customers consider when deciding which bank to go with," said an official at a Big Five bank.
Asked if customers stayed with their banks because of surcharges, another bank official said, "Theoretically, I suppose this could play a factor, but by that line of reasoning everyone would belong to Royal because they have the biggest ABM network. I think that view overestimates the importance of a voluntary $1.50 fee and underestimates all the other attributes one considers when choosing financial services."
