ATM fees spark investor interest

A new report has revealed that investors are seeing increased potential in the ATM market, prompting a renewed call for a cap on ATM fees.

According to the report, published by the Australia Institute and consumer group Choice, Australians spend $750 million a year on ATM fees due to the increasing number of ATMs owned by non-banks.

In 2009 the Reserve Bank abolished indirect fees that banks charged each other for transferring money to ATM machines and banks were instead required to charge customers directly.

According to the Australia Institute that led to an increase in the number of ATMs in Australia not operated by banks, with deputy director Josh Fear claiming the abolition of indirect fees has made owning ATMs much more profitable for entrepreneurs and investors.

Banks and non-banks typically charge around $1.50 to $2 when a consumer uses an ATM not operated by their bank but Fear says foreign transactions should be closer to $1.

“Because of the mark-up investors in non-bank ATMs have realised the potential to make money,” Fear says.

The Australia Institute and Choice want the government to make it compulsory to display fees on the outside of automatic teller machines.

Tim Scala, managing director of My ATM, says the business sold around 1000 ATMs last year and he expects that figure to increase.

“The ATM industry has been growing steadily at 4% or 5% for the last 10 years and there’s still plenty of growth left,” Scala says.

“Population growth and governments looking to boost regional areas will only help see the demand for ATMs continue to grow.”

According to Scala around 70% of people who invest in ATMs are property investors looking to diversify their portfolios.

“They are quite shocked that after 3% or 4% in rent for their property they can come across and get 20% from something so small and simple,” he says.

“Investors either get 20% of their investment per annum or 30 cents from every transaction – whichever is greater.”

“The banks lose heaps of money on ATMs, around $270 million per year

“If ATMs continue to lose money for the banks the market may move towards an independent model.”

Australian Bankers’ Association chief executive Steven Münchenberg says the big four banks provide less than half of the ATMs in Australia.

The ABA has criticised a plan by the Greens to put a cap on ATM fees, saying it could backfire on consumers.

“The Greens policy proposal to reduce the $2 ATM operator fee is short-sighted and means that bank customers may pay fees where typically none are paid now,” Münchenberg says.

“If you are the customer of a bank and you use an ATM owned or networked by that bank the user fee is $0. Banks typically do not charge their customers for using their own ATM and the majority of ATM transactions are free.

“If, on the other hand, a customer chooses to use another provider’s ATM then they are likely to incur a fee directly from the provider.

“For banks these fees typically range from $1.50 to $2. You can’t sensibly focus just on one ATM fee without considering the zero dollar cost.

“The Greens’ bill would cap this fee at a national cost level. If this approach is applied consistently all customers may need to be charged the cost of their ATM transactions to cover the costs of providing an ATM system.

“This means those customers who currently enjoy unlimited free ATM transactions may ultimately face ATM fees.”

Münchenberg says if the $2 fee is reduced by regulation ATMs outside metropolitan areas, which attract fewer customers, may become uncommercial, which could result in fewer ATMs in those areas.