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GAO study examines ATM fees

April 15, 2013

The United States Government Accountability Office has issued a Report to Congressional Requesters regarding ATM surcharges. The 64-page report, "Automated Teller Machines: Some Consumer Fees Have Increased," arises from a 2008 GAO report on ATM fee increases and responds to a request from Congress for a review of issues related to these increases.

The report discusses:

• the business models for ATM operators and how they set ATM fees;
• the fee amounts that consumers incur for ATM transactions and how fees have changed over time; and
• the reported costs of ATM operations and how the costs and revenues are expected to change.

For its report, the GAO surveyed a "nongeneralizable" sample of 30 financial institutions and four independent ATM operators in order to collect information on their ATM operations and costs in 2011.

The GAO also analyzed two types of data from firms specializing in the financial services industry:

• data on fees charged by financial institutions from 2007 to 2012 that are generalizable to all financial institutions in the U.S.; and
• nongeneralizable data on fees charged by independent ATM operators that were procured by "mystery shoppers" at 100 judgmentally selected independent ATMs in 2012.

The GAO also interviewed industry representatives and federal regulators to understand ATM operations and requirements.

Industry surcharges

The GAO found that among FIs, both the prevalance and the amount of surcharge fees have increased since 2007. The average fee increased from $1.75 in 2007 to $2.10 in 2012, in 2012 dollars. In 2012, fees ranged from 45 cents to $5.

Of a nongeneralizable sample of 100 ATMs run by independent operators found an average surcharge fee of $2.24, with a range of $1.50 to $3 in 2012. However, the GAO noted, some independent ATMs might have surcharge fees that are higher or lower than those in its sample.

The GAO concluded that the foreign fee — the fee assessed by financial institutions for using an ATM outside the institution's network — generally stayed constant in dollar amount between 2007 and 2012.

The GAO report also observed that consumers have many ways to obtain cash without incurring any fees at all, such as using ATMs within their financial institution's network.

Additionally, the report said, some FIs participate in surcharge-free networks that allow their customers free access to a greatly expanded number of available surcharge-free ATMs.

Industry costs

GAO's analysis of the ATM cost data reported by a nongeneralizable sample of financial institutions revealed differences in reported cost drivers for ATM operations.

For example, reported investments in hardware and software represented a higher percentage of total ATM costs for large FIs than for the midsize banks and credit unions.

Key cost drivers reported by the nongeneralizable sample of independent ATM operators varied, but commonly reported costs were rent, infrastructure, and transaction processing.

In addition, most of the surveyed ATM operators reported that overall per-ATM costs have increased over the past five years, while per-ATM revenues have declined. Many of the operators GAO contacted believe that ATM operation costs will continue to rise in the future and that revenues will be flat or decline.

Read more about trends and statistics.