STRATEGIC PARTNERS
February 16, 2003
LONDON -- The UK's Office of Fair Trading has launched an investigation into interchange rates for ATMs due to concerns the system is anti-competitive.
According to a report in The Independent, the investigation could lead to a reduction of about 25 percent in the amount issuers can charge acquirers, prompting fears some institutions will decide that some of their ATMs are too expensive to run and shut them down.
The OFT began its investigation two weeks ago and is likely to take about six months to trawl through the procedures banks use for setting charges known as interchange fees.
The government agency took on the task after Donald Cruickshank published a highly critical review of the whole banking industry in March 2000, in which he singled out interchange fees as particularly opaque and anti-competitive.
Banks have strongly rejected the accusation and say the levy for using their ATMs is very close to the actual cost of running them.
The cost a bank must pay for its customer to use an off-site ATM has already fallen from 40p (about 64 cents U.S.) to 33p (about 52 cents) while the cost for using a branch ATM has gone from 28p (about 45 cents) to 20p (about 32 cents) within the past two years.
The major clearing banks have the most to lose from a further cut in the fee because they control the vast majority of the UK's 44,000 ATMs. Royal Bank of Scotland has the largest network, with 5,400 ATMs through its own and the NatWest brand. Lloyds TSB, Barlcays, HSBC and HBOS also have a substantial presence in the market.
Banking sources said if the OFT does decide to squeeze them further, banks with the largest networks may decide to close ATMs which are used least, because they are the most expensive to operate, or they may try to outsource the running of their networks to other companies such as IADs (independent ATM deployers).
