Banking on short-term memory: the ATM fee debate

Travis Fast

Canadian banks are so aristocratic in their attitude that when they are actually forced to defend themselves they always come up sounding flat and disingenuous. To be sure there is no doubt that it costs some money to maintain a network of some 4000 ATMs. But what the banks fail to mention is that this network has already been paid for in perpetuity.

The fact is back when the banks went through a major workforce downsizing operation in the mid 1990s they did so partly by arguing that many of their branches and tellers had become redundant in the face of technological advances (ATMs). The banks installed so many ATMs precisely because it allowed them to save on labour and operating costs. That is, ATMs pay for themselves compared to having real people and real buildings. In fact, the ATM side of the business is so lucrative that representatives of the Banking industry refuse to open their books to parliamentary scrutiny. No doubt due to an embarrassment of riches.

How lucrative is the ATM business? I don’t really know but we do have some useful analogues to get a sense of it. One of the best comparisons is to be found at your humble payphone. In fact, the phone network is a very close analogue to the ATM network and the cost of running both networks should be roughly comparable as well. If I can make a local call for .25 cents at a payphone and the phone company can still break even, it gives you sense of just how lucrative those ATM fees are. Think of it, $3.00 for a local call from a payphone. If only the CRTC was so generous to the telecoms.

A more sober proposal to regulate ATM fees would be to ban the practice of double billing whereby your bank charges you for using another banks ATM. For example if I use a Royal Bank ATM not only does the Royal Bank charge me $1.50 but my bank also charges me $1.50 for a total cost of $3.00. At the very least your home Bank should be barred from charging you the additional $1.50. This would mean that the cost of a local call was still six times higher than it should be, but at least it would not be quite so obscene.

Of course there are two other possibilities. The creation of a public banking system; or blow the retail canadian banking market open to real competition. Perhaps those are the choices the banks should be given rather then regulating their less than human service fees.

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