|
ATM reform plan could see 'convenience fees' as high as $2.50 | |||
Greg Monaghan, Cashcard, COO
(From eCommerce Report vol. 11 No.10) Fees on Automated Telling Machine (ATM) transactions could rise to as high as $2.50 if, as seems likely, the Reserve Bank of Australia (RBA) approves a new, industry-developed, reform plan. But as Cashcard chief operating officer, Greg Monaghan, explained to an Australian eCommerce Network (AeCN) seminar in Sydney last week, the proposed new "convenience fee" system will, in the long-term, reduce the total amount of fees that consumers pay for ATM transactions. Moreover the reforms would see more machines installed in more locations, including rural and regional Australia. "It will reward people for installing machines in locations that currently don't have them" he said. Monaghan told the seminar that the ATM industry plan had been developed at the instigation of the RBA. The RBA wants transaction fees displayed on the ATM screen at the time of the transaction so as to send clearer pricing signals to consumers on the true cost of using the machines. According to Monaghan, not all ATM owners and /operators agree that the so-called direct-charging needs to be introduced. But he said the main players in the industry had, after many years of work, now reached a "broad consensus" on how to implement it. Currently, the larger banks' fees on withdrawals that card-holders make through other financial institutions ATM's (i.e. so-called foreign ATM's) are as much as $1.50 per transaction. But card-holders only find out about the fees when they get their monthly account statement. Moreover the single transaction fee on the statement is actually a combined total. It combines the fee charged by the card-issuing bank, any fees levied for network switching, and an interchange fee. Monaghan said the interchange fee is typically between 90c and $1.25 and is used to pay any fees to the ATM owner or operator if, as is often the case today, the ATM is owned by an independent operator. Under the proposed reform plan these interchange fees would be abolished, and instead replaced by a direct-charge levied by the ATM owner. "We call it a convenience fee instead of a direct charge", he said " because we think that more accurately reflects what it is." Monaghan said it had been tough getting industry agreement on the plan because for many of the smaller financial institutions, with only a few ATMs, revenue earned from interchange fees is important to their viability. So the industry's plan provides exemptions for smaller financial institutions allowing them to continue charging each other interchange fees in their "aggregated networks." |
This means that card-holders from smaller credit unions, who mostly use their cards in other financial institutions ATMs, will avoid potentially being hit with convenience fees virtually every time they use their card.
Monaghan suggested that the RBA could regulate the exemption by allowing financial institutions to have their ATM in these aggregated networks so long as their market-share is less than 5%. Describing the proposal as "fee-free zones", he said the aggregated networks are the key to getting interchange fees abolished and the key to getting the plan implemented quickly. He said that whilst there had been some political controversy around the proposed convenience fees, with claims that rural and regional customers would face higher charges, the plan provides for fees to be capped during the transition period of their introduction. Moreover he said that the banks had undertaken to charge the same issuer-fee at their ATM's right across Australia, and regardless of where they are located. (The plan suggests an issuer fee at 15c for the banks with Monaghan saying that should be enough when the banks "aren't providing the cash, aren't providing the machine, aren't providing the telephone lines and are just authorizing the transaction.") Monaghan said that he didn't usually accept speaking invitations, but the former Mastercard and Visa board member told the AeCN seminar that he had grown tired of the many years spent working on ATM reform. 
Greg Monaghan, Cashcard and Mark Degotardi, CUSCALWork on an ATM reform plan began as far back as 1998, he said, and with the plan likely to take as much as 18months to fully implement, he said it was time for the RBA to bite the bullet. "If the RBA wants direct charging, then they should designate" he said, adding that if the designation was going to be useful, "it has to happen quickly". Mark Degotardi, a policy adviser for the Credit Union Services Corporation of Australia, (CUSCAL) echoed Monaghans' comments at the AeCN seminar. "If the RBA wants direct charging then the only way I see it happening is if the RBA designates [the ATM system]" adding that the message for the RBA is clear. "Don't hesitate, designate." The ATM industry plan and submission's from Cashcard, CUSCAL and others can be downloaded from the RBA's web-site. For more information, go to www.cashcard.com.au www.rba.gov.au www.aecn.org Copies of the seminar presentations will shortly be available at the eCommerce Report web-site. (Note: access restricted to AeCN or eCommerce Report subscribers only - userID/password required) |
|||
