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In this report, all data refer to the United States unless otherwise indicated. |
The shared computer networks that link the nation's fleet of automated teller machines (ATMs) with depository institutions are in the midst of a wave of mergers and consolidation. At the same time, many ATM owners have been raising the fees that they charge cardholders to use their machines. Policymakers have begun to question whether those changes are dampening competition in the banking industry and specifically in the ATM market. Of further concern is whether market forces alone will ultimately drive down charges for ATM use.
The Congressional Budget Office (CBO) prepared this report at the request of the Senate Committee on Banking, Housing, and Urban Affairs. The paper analyzes the economic structure of the relevant markets and the nature of competition and change within them. In keeping with CBO's mandate to provide objective, impartial analysis, this report makes no recommendations.
Judith S. Ruud and Philip Webre of CBO's Natural Resources and Commerce Division wrote the report under the supervision of Jan Paul Acton and Elliot Schwartz. David Balto, James McAndrews, Robin Prager, and Lawrence White offered helpful comments on early drafts. Tim Lasocki provided research assistance and prepared the graphics. Leah Mazade edited the manuscript, assisted by Melissa Burman. Angela Z. McCollough and Rae Wiseman prepared the paper for publication. Laurie Brown prepared the electronic version for CBO's World Wide Web site (http:/www.cbo.gov/).
June E. O'Neill
Director
July 1998
II - THE MARKET FOR ATM SERVICES
III - ATM NETWORKS AND BANKING COMPETITION
IV - ASSESSING COMPETITION AMONG BANKS AND OTHER ATM OWNERS
V - CONCLUSIONS OF THE ANALYSIS AND POTENTIAL POLICY OPTIONS
| TABLES | |
| S-1. | ATM Fees |
| S-2. | Interchange Fees for Cash Withdrawals from an ATM Charged by Selected Networks |
| 1. | Total Monthly ATM and Point-of-Sale Transactions, 1988-1997 |
| 2. | ATM Fees |
| 3. | Switch Fees Charged by Selected ATM Networks, 1993 and 1997 |
| 4. | Interchange Fees for Cash Withdrawals from an ATM Charged by Selected Networks |
| 5. | Break-Even Analysis for an ATM |
| 6. | The 50 Top ATM Owners, 1996 and 1997 |
| 7. | The 50 Top ATM Owners, 1993 |
| 8. | Four-Firm Concentration Ratios of Deposits of All FDIC-Insured Institutions, by State |
| 9. | Eight-Firm Concentration Ratios of Deposits of All FDIC-Insured Institutions, by State |
| FIGURES | |
| 1. | ATMs in Operation, 1973-1997 |
| 2. | Percentage of New ATMs Installed on and Off Bank Premises, 1995-1997 |
| 3. | Monthly Transactions per ATM, 1986-1997 |
| 4. | Typical Cash Withdrawal from an ATM Across a Shared Regional ATM Network |
| 5. | Total Number of Debit Cards in Use, 1986-1997 |
| 6. | On-Line Terminals That Can Be Accessed Using Debit Cards |
| 7. | Number of Off-Line and On-Line Debit Cards, 1991-1997 |
| 8. | Percentage of All "Foreign" ATM Transactions Handled by the Largest ATM Networks, 1993-1997 |
| 9. | Percentage Change in Number of ATM Transactions, 1994-1997 |
| 10. | Share of Deposits Held by Commercial Banks Nationwide, by Asset Class |
| 11. | Share of Deposits Held by Commercial Banks in States Allowing Surcharging Before 1995 and States Not Allowing Surcharging, by Asset Class |
| BOXES | |
| 1. | Cardholder Protections |
| 2. | Interaction Among Cardholder Fees |
