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June 07, 2007 • Issue 07:06:01

Surcharge-free ATMs abuzz

By Tracy Kitten

This story was originally published on ATMmarketplace.com, April. 17, 2007; reprinted with permission. © 2007 NetWorld Alliance LLC. All rights reserved.

ATM-transaction fees are a hot topic. A legislative backlash against ATM surcharging and foreign-use fees has garnered recent attention in Canada and remains a front-burner issue in the United Kingdom.

In the United States, attention on ATM fees has been driven by consumer demand.

Over the last 12 to 18 months, some large to mid-sized banks have launched fee-free ATM access campaigns as a way to woo new customers.

In March, Seattle-based Washington Mutual Inc. ($324 billion in assets), the nation's third-largest thrift, announced it would stop charging customers who sign up for its WaMu Free Checking account fees for using foreign ATMs.

With a clever advertising campaign, the new, more laid back WaMu aims to separate itself from the stereotype of a rigid banker - someone who gives nothing away for free.

And WaMu is not alone. Pittsburgh-based PNC ($92 billion in assets) and Portland, Maine-based TD Banknorth Inc. ($40 billion in assets) have both launched campaigns that reward customers with certain types of accounts with fee-free out-of-network ATM access.

PNC's offer isn't as flexible as most, however, in that it requires accountholders to maintain a monthly balance of $2,500 in order to qualify for the fee-free reward.

Waiving fees for foreign or out-of-network ATM use has long been a practice on the credit union and community bank side, where competition for market share is steep.

Surcharge-free ATM access at credit-union ATMs also has been a long-standing practice, as credit unions have a tradition of collaborating and shared ATM networks, said Jim Hanisch.

Hanisch is the Executive Vice President of Network Operations and Corporate Development for Ontario, Calif.-based Co-Op Financial Services, the nation's largest credit-union owned electronic-funds-transfer (EFT) network. Hanisch said the surcharge-free, fee-free hype is interesting, but surprising. "I'm not sure why it's such a hot topic in the media right now," he said. "The driver for it - consumer demand - has been around since the late 1990s, when surcharging began."

The network boon

Hanisch admits the notion of surcharge-free and fee-free ATM access has attracted a great deal of industry attention over the last several months. But from Co-Op's perspective, which launched its shared network in 1981, the notion isn't revolutionary.

Co-Op's network includes some 25,000 ATMs scattered throughout the United States and Canada. The network includes 6,200 shared-deposit locations and 5,500 Vcom terminals, which are owned and operated by 7-Eleven.

And Co-Op expects this summer to add around 2,000 shared-deposit locations through its deal with 7-Eleven.

"It's pretty clear cut," he said. "Every bit of research out there points to the availability of surcharge-free ATMs [where the acquiring FI fee is waived] being a key determinant in financial-institution choice among consumers. It's important to consumers; therefore, it's, important to FIs."

Jan Estep, Business Manager for St. Paul, Minn.-based Elan Financial Services, the EFT network that in May 2005 purchased EFT provider Genpass Technologies, agrees that consumer demand is driving interest. But so is consumer confidence.

"There's been a lot of talk about surcharge-free networks, and I wouldn't be surprised if others work to make and build new surcharge-free networks," she said.

"The challenge is the number of ATMs and the number of cardholders, and frankly the cardholders need to feel comfortable in both finding and approaching ATMs. [ATM] providers need to make them feel as good about the service as they can."

Estep said many of the financial institutions Elan works with are interested in expanding their ATM-network reaches, but they worry about consumer confidence. Working with trusted brands and networks is important to FIs, because it's at the top of consumers' minds.

By signing with a surcharge-free network, they gain market share with a trusted brand, she said.

"It makes for an interesting set of factors, to see how we can introduce transactions at ATMs in an attractive way," Estep said.

She added that EBT and payroll cards have indirectly fueled surcharge-free interest, since holders of those types of cards are often given fee-free access to funds at ATMs.

Elan merged its Fastbank Free surcharge-free ATM network with Genpass' surcharge-free MoneyPass network in July 2006 and later completely rolled the Genpass brand into Elan.

Where the Co-Op Network is open only to credit unions, MoneyPass and its competitor, Allpoint Network, are open to all FIs, Estep said.

MoneyPass has 10,000 ATMs, 700 FIs and 25 million cardholders, and Estep expects the network to grow between 25% and 30% in 2007. She said Elan also plans to add between 200 and 500 FIs - an admittedly lofty goal.

Number of networks grows

The concept of surcharge-free ATM access is not new. In fact, the roots of all EFT networks may be found in small, regional surcharge-free networks, a dying breed.

A handful of those regional networks remain - remnants of the first shared networking deals signed by FIs during the early ATM days - but most have been absorbed by larger networks.

Greenwood Village, Colo.-based First Data Corp.'s April 9 acquisition announcement of Instant Cash Services, Wells Fargo's surcharge-free network, reflects the trend.

The network, which includes about 500 community banks, credit unions and nonfinancial institutions, provides its network members surcharge-free ATM access in 20 states.

First Data says it plans to operate Instant Cash separately from its Star network, and Wells will continue to participate in the network, as well as continue working with its own customers via Instant Cash. Wells and First Data's global corresponding-bank relationship helped to leverage the acquisition, a First Data spokesman said.

"We have a referral deal between Wells and Instant Cash, so that will continue," he said. "There will be an ongoing collaborative relationship between the two companies."

The company has announced no plans to merge Instant Cash with Starsf, Star's surcharge-free network.

Other acquisitions, like Houston-based ISO Cardtronics LP's purchase of surcharge-free Allpoint Network in December 2005, show growing interest among all types of entities in the surcharge-free trend.

Allpoint, which launched in April 2003, includes more than 32,000 ATMs and more than 600 member FIs.

Ben Psillas, the network's President, doesn't expect interest or growth in the network to pause anytime soon. Earlier this month, Psillas announced plans to expand into the U.K., adding some 1,400 surcharge-free ATMs to its network through a deal with fellow Cardtronics' subsidiary Bank Machine Ltd.

"Surcharge-free networks help FIs and consumers," he said. "How do small, medium or large banks and credit unions compete with the huge regional FIs when all the studies and statistics say that one of the main drivers that customers look at when choosing a financial institution relates to ATM access? They have to offer convenience."

Surcharge-free networks, Psillas said, offer FIs options and allow them to expand. And, like Estep, he said the industry is paying attention to surcharge-free networks because consumers are demanding better service, more access and fewer fees.

"By joining a surcharge free network, the bank or credit union still has the foreign fee [the fee it charges its customers or members for out-of-network transactions] to consider," Psillas said.

"But the majority of our [FI] customers are waiving that foreign fee and just making all of the transactions like on-us transactions, because they don't want to confuse the customer with fees." end of article

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