Working Paper: NBER ID: w9883
Authors: Elizabeth W. Croft; Barbara J. Spencer
Abstract: This paper develops a spacial model of ATM networks to explore the implications for banks and non-banks of interchange fees, foreign fees and surcharges applied to transactions by customers at other than an own-bank ATM. Surcharging raises the price (foreign fee plus surcharge) paid by customers above the joint profit-maximizing level achieved by setting the interchange fee at marginal cost and not surcharging. Similar size banks would agree not to surcharge, but such an agreement is typically not possible between a bank and a non-bank. A high cost of teller transactions modifies the tendency towards high ATM fees.
Keywords: ATM networks; surcharging; interchange fees; banks; nonbanks
JEL Codes: L1; G2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| number of ATMs (G21) | surcharges (H29) |
| banning surcharging (G28) | foreign fees maximizing joint profits (F23) |
| competition between larger bank and smaller bank (G21) | preference for lower interchange fee (D49) |
| nonbank entry and ability to surcharge (G21) | increased ATM fees (E49) |
| surcharging (H22) | total price paid by consumers (D41) |