Financial Institutions See Savings from Surcharge-Free ATM Network Membership

Transcription

1 WHITE PAPER Financial Institutions See Savings from Surcharge-Free ATM Network Membership SPONSORED BY: Surcharge-free ATM networks save banks and credit unions the cost of rebates for their cardholders foreign ATM transactions. ATMmarketplace.com There is a segment of have decided that the to their cardholders is to refund them for any ATM surcharges they incur Doug Miraglia, president of MoneyPass. Reimbursing cardholders for ATM surcharges is a considerable expense for financial institutions. By joining a surcharge-free network such as Elan Financial Services MoneyPass Network, financial institutions can offer a valuable benefit to their cardholders and eliminate the cost of reimbursing their ATM surcharges. There is a segment of financial institutions that have decided that the way to provide benefits to their cardholders is to refund them for any ATM surcharges they incur, said Doug Miraglia, president of MoneyPass. But offering ATM surcharge rebates is not the most cost-effective way to give them surcharge-free ATM access. In fact, it is a very costly policy, as it means your cardholders will become ATM junkies. They will make multiple low-dollar ATM withdrawals each month, rather than one or two large withdrawals, which will add to the burden of the financial institution s expenses. Miraglia says some financial institutions require cardholders to produce ATM receipts showing surcharge fees they have paid, while others automatically refund ATM surcharges once a month. The financial institution typically has to pay $2.50 in surcharge refund per transaction plus 50 cents of interchange, totalling $3 per transaction, he said. There is also the cost of the financial institution s systems for tracking foreign (i.e., out of the bank s network) ATM transactions and refunds. By contrast, a financial institution that belongs to the MoneyPass network pays around $1 per MoneyPass ATM transaction carried out by its cardholders. This is the all-in cost of a MoneyPass transaction, including interchange, Miraglia said. When a financial institution joins MoneyPass, it can better forecast what the cost of its cardholders foreign ATM transactions will be. Joining MoneyPass gives financial institutions a very controlled way of providing surcharge-free ATM access to their customers. 1

2 Rising surcharges Separate research studies by Bankrate.com and the U.S. Government Accountability Office (GAO) have found that ATM surcharge fees have recently increased in the U.S. According to Bankrate.com, the average ATM surcharge rose by 4 percent year-over-year to $2.50 in 2012, representing the eighth consecutive year that the average ATM surcharge amount has increased. The average ATM surcharge levied by U.S. financial institutions rose from $1.75 in 2007 to $2.10 in 2012, the GAO says in its Automated Teller Machines: Some Consumer Fees Have Increased report. In 2012, surcharges levied by financial institutions ranged from $0.45 to $5. MoneyPass key facts 23,000 ATMs 28 ISO/IAD members 60 million MoneyPass cards issued by MoneyPass members 6 million MoneyPass ATM transactions per month MoneyPass cardholders saved an estimated $150 million in 2012 Source: Elan Financial Services The GAO also surveyed 100 ATMs owned by independent ATM operators (ISOs/IADs) and found that the average surcharge at those ATMs in 2012 was $2.24. According to the GAO surcharge fees levied by ISOs/IADs ranged from $1.50 to $3 in The GAO report indicates that, in 2012, 97 percent of U.S. banks and 95 percent of U.S. credit unions charged non-customers a surcharge for using their ATMs. Miraglia says that in 2013 MoneyPass cardholders will save $180 million to $200 million in ATM surcharge fees. That calculation is based on the millions of MoneyPass transactions that take place each month, at an estimated $2.50 ATM surcharge fee per transaction. In 2012, MoneyPass cardholders saved $150 million in ATM surcharge fees. According to Miraglia, financial institutions may think that if they join a surcharge-free ATM network, they still need to rebate surcharges for foreign ATM withdrawals that occur outside that network. They are concerned that they may lose cardholders if they stop refunding ATM surcharges, he said. But their fear is unfounded. Surcharge-free ATM access is not the only reason why cardholders bank with these financial institutions. There will be other reasons, such as friendly tellers, convenient branch locations and extensive banking hours, or because they have a mortgage with the bank. People usually change financial institutions because of a series of reasons, and they don t make the decision to move lightly, Miraglia adds. 2

3 They are concerned that they may lose cardholders if they stop refunding ATM surcharges. But their fear is unfounded. Doug Miraglia, president of MoneyPass If the financial institution s decision to participate in MoneyPass is presented correctly to cardholders, it can be seen as good news, he said. We say the good-news message to cardholders is that your financial institution has joined a network of 23,000 conveniently located ATMs and you can use these ATMs just as if they were your own financial institution s ATMs. This allows the community bank with 15 branches to gain access to a large ATM footprint and compete with a bank with a larger or national ATM fleet. Financial institutions that participate in MoneyPass and retain their surcharge refund program for non-moneypass ATMs eventually drop the program and offer only surcharge-free withdrawals from MoneyPass ATMs, Miraglia says. Cardholders need time to change their behavior once their bank has joined MoneyPass, he said. It takes them a while to get used to the idea that they will only have surcharge-free ATM transactions at MoneyPass ATMs. Some financial institutions also opt to forgo charging the foreign ATM fee when they begin participating in the MoneyPass Network. A foreign ATM fee is a fee that is charged to a cardholder by their card issuer for using an ATM owned by another organization. According to the GAO, 55% of U.S. financial institutions charge their cardholders foreign ATM fees for using other companies ATMs. The GAO says that the average foreign ATM fee charged by banks in 2012 was $1.52, compared with $1.29 charged by credit unions. Location Participating financial institutions need to let their cardholders know how to locate MoneyPass ATMs, says Miraglia. Cardholders can use our free MoneyPass ATM locator tool either online or on their mobile devices, he said. We provide free marketing support, including images and other material such as statement inserts. It s very important for MoneyPass participants to put the MoneyPass branding on their ATMs. According to Miraglia, 40% of the ATMs in the MoneyPass network are offpremise ATMs owned by ISOs/IADs, with the remainder being ATMs owned by financial institutions. Because MoneyPass includes non-bank ATMs, this means that MoneyPass cardholders have access to ATMs situated at merchant locations including many large regional and national retailers. 3

4 Case Study; First Northern Bank Prior to participating in MoneyPass, First Northern Bank had a policy of reimbursing all its customers surcharges incurred from using other financial institutions, ISOs /IADs ATMs, including international ATM fees. The only surcharges that the Dixon, CA.-based bank didn t reimburse were for withdrawals from casino ATMs. We required customers to come into the branch with their ATM receipts to claim their refunds, said Kimberly DeBra, executive vice president of corporate communications, sales and marketing at First Northern Bank. We didn t have a limit on the amount of rebates that customers could claim. ATM rebates rose from $18,000 in 2006 to $72,000 in 2010, falling to $70,000 in We noticed the ATM rebate claims rise as the economy worsened in 2008 to Total ATMs in the U.S.: MoneyPass 425,000 ATM key ownership facts 23,000 ISO/IAD-owned ATMs ATMs 222,500 FI-owned ATMs 202, ISO/IAD members On-premise versus off-premise ATMs Off-premise 60 million MoneyPass ATMs: 290,000 cards issued On-premise by MoneyPass ATMs: members 135,000 6 million MoneyPass ATM transactions per month Off-premise ATMs Financial institution-owned: 67,500 ISO/IAD-owned/operated: MoneyPass cardholders saved 222,500 an estimated $150 million in 2012 Source: National ATM Council, based on 2010 EFT Data Book and Tremont Capital 2009 ATM Industry Fact Sheet According to DeBra, the average rebate per customer ranged from $2 to $3. After joining MoneyPass in February 2012, First Northern Bank didn t immediately stop rebating its customers ATM surcharges. We provided rebates for ATM surcharges incurred by our customers from 2005 until May 2012, DeBra said. We wanted to give our customers ample time to get used to the end of the rebates. First Northern Bank included promotional messages about the benefits of MoneyPass in its customers statements for several months after joining MoneyPass, DeBra says. The statement inserts stressed that, wherever customers live, work or travel in the U.S., they are sure to find a Money- Pass ATM nearby. The transition from surcharge rebates to MoneyPass worked well and didn t meet any customer resistance, DeBra noted. This is because we had something to replace the rebates with: free access to 23,000 Money- Pass ATMs nationwide. According to DeBra, First Northern Bank decided to retain its policy of offering free checking accounts, as a way to differentiate itself from other banks. But abandoning ATM rebates is saving us $65,000 a year, she said. This figure is based on the $70,000 of rebates that we paid our customers in 2011, minus the $5,000 a year that we pay to MoneyPass for our customers MoneyPass ATM withdrawals. 4

5 About the sponsor: Elan Financial Services is a business unit of Minneapolis-based U.S. Bank. For more than 40 years, Elan has provided a full range of payments, products and services to ISOs/IADs and financial institutions. It owns and operates the MoneyPass Network, which provides surcharge-free access to 23,000 ATMs nationwide. Visit for more information about the MoneyPass Network. Maps In addition to encouraging its customers to use the free MoneyPass ATM locator mobile app and website, First Northern Bank provided tellers with maps showing the location of MoneyPass ATMs in their local community. The tellers would give these maps to customers who inquired in the branch about where they could find MoneyPass ATMs locally, DeBra said. First Northern Bank has 10 full-service branches in suburban communities around Sacramento, including a branch in downtown Sacramento. The bank also has 10 ATMs. According to Elan Financial Services, there are around 100 MoneyPass ATMs in the metropolitan areas of Sacramento where First Northern Bank has branches. In California, there are 2,438 MoneyPass ATMs. First Northern Bank advertises its MoneyPass membership in branch lobby posters and in the brochures it mails to local residents to encourage them to open a First Northern Bank account. Some people may prefer to bank with a large bank rather than a community bank like First Northern Bank because they want access to a large network of free ATMs, DeBra said. So, joining MoneyPass enables us to compete in terms of ATM coverage. In January 2013, 9.9% of First Northern Bank s customers foreign ATM transactions took place in the MoneyPass network. This percentage had risen to 11.5% in May 2013 and 12% in June First Northern Bank has decided to introduce a $1.50 foreign ATM fee for each withdrawal that its customers make at non-moneypass ATMs after the end of September This fee is at the lower end of what banks are charging for out-ofnetwork ATM transactions, DeBra said. First Northern Bank has seen a steady increase in the number of Money- Pass transactions at its ATMs by MoneyPass cardholders, DeBra says. This is a source of revenue for us, she said. 5