ATM FEE DECISION, THE

Credit Union Management,  Apr 2008  by Gamble, Richard H

• E-mail
• Print
• Link

What to charge for automated teller machine transactions continues to challenge credit union executives, but the dramatic rise of surchargefree ATM networks and declining ATM usage are making the issue somewhat easier to resolve.

The nation's big banks recently increased ATM fees and surcharges significantly, presenting CU leaders with some real opportunities. They can either follow suit and increase revenue while still staying below bank charges or exploit a growing gap between what it costs to use bank ATMs vs. CU ATMs.

The most popular credit union ATM pricing strategy seems to be to attract and retain members by offering them a nationwide network of thousands of convenient surcharge-free ATMs. The incentives are strong to leverage an existing network rather than add large numbers of proprietary ATMs.

Avoiding ATM surcharges is becoming increasingly important to Americans. Last year U.S. consumers paid $9 billion in ATM surcharges, and "that number will only continue to rise," notes Jim Park, president/CEO of CUES Supplier member Credit Union 24 Inc. (www.cu24.com), Tallahassee, Fla., a credit union service organization with 500 credit union members and the sponsor of a large surcharge-free ATM network. "The big banks have been raising surcharges as high as $3 for a non-customer to use one of their ATMs."

If credit union members have to pay that much to get cash from an ATM because their credit union doesn't have an ATM where they need to get cash, that's a big incentive for the consumer to switch to a big bank to avoid the surcharges, he points out. "It's up to us and other networks to help credit unions find ways to give their members access to a broad network of ATMs without having to pay surcharges."

CUs can expand their ATM reach by joining a shared network like that offered by Credit Union 24 or CO-OP Financial Services (www.co-opfs.org), a CUES Supplier member based in Rancho Cucamonga, Calif. Or, they can join a non-shared network like Allpoint, explains Ben Psillas, president of Allpoint Network, Bethesda, Md.

In a shared network, participating CUs eliminate surcharges for their members by agreeing to waive those charges to the cardholders of other banks and CUs that are also network members, he explains.

By contrast, Allpoint (www.allpointnet work.com) sits between card-issuers and ATM owners and charges issuers a flat fee to provide surcharge-free ATM transactions to their cardholders, Psillas explains. "The financial institution pays Allpoint so their cardholders can get unlimited surcharge-free access to all our ATMs," he explains. "We get no surcharge income per click, but a monthly revenue stream from card issuers."

Credit Union 24 recently came out with "Credit Union HERE Premium," which links the ATMs of the Allpoint Network and MoneyPass (www.money pass.com) into a package that credit unions can buy to provide their members with 45,000 surcharge-free ATMs nationwide, Park reports. Credit Union 24 will decide in the next year whether all those ATMs will remain surcharge-free, he adds.

The Credit Union 24, Allpoint, MoneyPass fleet is now the nation's largest surcharge-free ATM program. This deal puts participating credit unions ahead of most big banks in sheer potential access to no-surcharge ATMs. While all machines would be surcharge-free to participating CU members, the CUs themselves might have to pay a fee to get that service for their members if the Allpoint business model ultimately prevails.

The rationale for buying into a network (or several) is clear: It's a cost-effective way credit unions can compete in a culture of mobile consumers who value convenience.

"Using a surcharge-free ATM network lets credit unions level the playing field with the giant banks that have lots of ATMs," Psillas explains. "Most credit unions don't have a lot of locations, but their members, like everyone else, want to travel and have easy access to their cash wherever they may be. Without an ATM network, it's hard for credit unions to compete on convenience, and convenience is critical. All the surveys I've seen show that credit unions surpass banks when it comes to customer service, but rank below banks when it comes to convenience. ATM networks help offset that convenience liability.

"Now people are more mobile," Psillas notes. "They just travel more and are more likely to have an unfore seen need for money while they're away from home." Vacations, military duty, college, business meetings, and family or class reunions all may put credit union members in places far from their credit union's proprietary ATMs, he notes.

Plus, Psillas emphasizes, younger consumers embrace technology to avoid having to make trips to the bank or credit union. "They like their mobile and online banking. They use an ATM as their virtual teller."

So the popular strategy for credit unions is to own compact fleets of ATMs in their local market areas and overlay this core infrastructure with network coverage that allows them to advertise unlimited access to thousands of surcharge-free ATMs across the country or even around the world, Psillas reports. "They like to use networks to complement their proprietary coverage. It gives them a powerful marketing message," he observes.