Flaherty, banks to discuss ATM fees

Duncan Mavin, Financial Post. Published: Monday, March 05, 2007

TORONTO -- Monday is d-day for opponents and supporters of automated teller machine fees as Canada's top bank executives are called to a meeting to discuss the controversial fees with federal Finance Minister Jim Flaherty.

Canada's big banks have been asked to explain why they charge the fees when some customers of banks in other countries do not have to pay anything.

Mr. Flaherty and NDP leader Jack Layton have both called on the banks to justify the fees, which are charged to customers of one bank when they withdraw cash from a machine belonging to a rival bank.

But the Finance Minister will face stiff opposition from the bankers, who say targeting ATM fees is unfair.

"It is essential that our politicians look beyond reactionary policies and short-term politics," said Royal Bank of Canada chief executive Gord Nixon ahead of the meeting.

The debate over ATM fees is "a very small issue that is being used politically," Mr. Nixon said. The bankers argue that the fees are aviodable for most customers.

"If Finance is serious about this issue, they should launch a full-scale ad campaign to better-educate consumers on money-saving tips, such as using your own bank's machines, asking a store cashier for cash back on a debit transaction and making fewer, larger withdrawals," said a senior banker.

More than 75% of bank ATM cash withdrawals don't result in charges because they are by customers using their own banks' ATMs, according to the Canadian Bankers Association.

Canadians can also obtain money without incurring fees by taking cash back when they buy goods with their Interac debit cards.

As well, banking insiders say the rapid expansion in the number of non-bank cash machines -- known as white label machines -- which charge higher fees than the banks, shows Canadians are willing to pay for the convenience of using ATMs.

The white label market emerged in Canada after an order by the Competition Bureau in 1996 permitted ATM providers to charge a fee to users in order to increase the accessibility of the machines. There are now 35,000 non-bank ATMs in Canada compared with less than 16,000 that belong to the banks.

The banks even have some support from among the operators of white-label machines.

If the banks are no longer allowed to charge fees, it could spell disaster for the industry and reduce choice for consumers, said Mischa Weisz, chief executive of TNS Smart Network Inc., which operates about 20% of Canada's independent ATMs.

To compete with the banks, white-label providers would be forced to lower their fees, too, and could be forced out of business, Mr. Weisz said.

The banks say they charge fees to customers of rival banks because there is a significant expense involved in having a network of ATMs.

Customers of Canada's banks have better access to ATM machines than bank customers anywhere else in the world. There are more than 1,600 ATMs per million inhabitants in Canada, compared with only about 1,300 per million in the United States, for example.

But that network has come at a cost to the banks. Toronto-Dominion Bank has just completed a project to upgrade 2,500 ATMs at a cost of $250- million, for instance. CIBC has invested $125-million in the last year on improving its network of 3,800 machines.

Some bankers say the government should allow individual financial institutions to determine their own ABM pricing structure. HSBC Canada, for example, has a deal with Bank of Montreal under which it has bought access to BMO's ATMs and has chosen not to charge a fee to HSBC customers.

Furthermore, Canadian banks argue that claims banks in other countries such as the United States and United Kingdom do not charge customers for ATM transactions are misleading. Only a minority of U.S. bank customers get free ATM services. Although banks in the U.K. generally do not charge a fee for ATM usage, consumers and regulators there have complained vociferously in recent weeks about high levels of charges in other areas, such as fees for overdrafts and late credit card payments.

dmavin@nationalpost.com

© Financial Post 2007


Flaherty, banks to discuss ATM fees Duncan Mavin, Financial Post. Published: Monday, March 05, 2007 TORONTO -- Monday is d-day for opponents and supporters of automated teller machine fees as Canada's top bank executives are called to a meeting to discuss the controversial fees with federal Finance Minister Jim Flaherty. Canada's big banks have been asked to explain why they charge the fees when some customers of banks in other countries do not have to pay anything. Mr. Flaherty and NDP leader Jack Layton have both called on the banks to justify the fees, which are charged to customers of one bank when they withdraw cash from a machine belonging to a rival bank. But the Finance Minister will face stiff opposition from the bankers, who say targeting ATM fees is unfair. "It is essential that our politicians look beyond reactionary policies and short-term politics," said Royal Bank of Canada chief executive Gord Nixon ahead of the meeting. The debate over ATM fees is "a very small issue that is being used politically," Mr. Nixon said. The bankers argue that the fees are aviodable for most customers. "If Finance is serious about this issue, they should launch a full-scale ad campaign to better-educate consumers on money-saving tips, such as using your own bank's machines, asking a store cashier for cash back on a debit transaction and making fewer, larger withdrawals," said a senior banker. More than 75% of bank ATM cash withdrawals don't result in charges because they are by customers using their own banks' ATMs, according to the Canadian Bankers Association. Canadians can also obtain money without incurring fees by taking cash back when they buy goods with their Interac debit cards. As well, banking insiders say the rapid expansion in the number of non-bank cash machines -- known as white label machines -- which charge higher fees than the banks, shows Canadians are willing to pay for the convenience of using ATMs. The white label market emerged in Canada after an order by the Competition Bureau in 1996 permitted ATM providers to charge a fee to users in order to increase the accessibility of the machines. There are now 35,000 non-bank ATMs in Canada compared with less than 16,000 that belong to the banks. The banks even have some support from among the operators of white-label machines. If the banks are no longer allowed to charge fees, it could spell disaster for the industry and reduce choice for consumers, said Mischa Weisz, chief executive of TNS Smart Network Inc., which operates about 20% of Canada's independent ATMs. To compete with the banks, white-label providers would be forced to lower their fees, too, and could be forced out of business, Mr. Weisz said. The banks say they charge fees to customers of rival banks because there is a significant expense involved in having a network of ATMs. Customers of Canada's banks have better access to ATM machines than bank customers anywhere else in the world. There are more than 1,600 ATMs per million inhabitants in Canada, compared with only about 1,300 per million in the United States, for example. But that network has come at a cost to the banks. Toronto-Dominion Bank has just completed a project to upgrade 2,500 ATMs at a cost of $250- million, for instance. CIBC has invested $125-million in the last year on improving its network of 3,800 machines. Some bankers say the government should allow individual financial institutions to determine their own ABM pricing structure. HSBC Canada, for example, has a deal with Bank of Montreal under which it has bought access to BMO's ATMs and has chosen not to charge a fee to HSBC customers. Furthermore, Canadian banks argue that claims banks in other countries such as the United States and United Kingdom do not charge customers for ATM transactions are misleading. Only a minority of U.S. bank customers get free ATM services. Although banks in the U.K. generally do not charge a fee for ATM usage, consumers and regulators there have complained vociferously in recent weeks about high levels of charges in other areas, such as fees for overdrafts and late credit card payments. dmavin@nationalpost.com © Financial Post 2007