Automated Teller Machines: Survey Results Indicate Banks' Surcharge Fees
Have Increased (Testimony, 07/15/98, GAO/T-GGD-98-171).

Pursuant to a congressional request, GAO discussed its study on
automated teller machine (ATM) deployment and surcharge fees assessed by
banks and thrifts over the past year, focusing on: (1) ATM deployment by
banks in the United States; and (2) the number of banks that surcharge
noncustomers and the amounts surcharged.

GAO noted that: (1) its survey results indicated that approximately the
same percentage of banks in the United States operated ATMs as of
February 1, 1998, as operated them as February 1, 1997--just over 70
percent; (2) however, during this 1-year period the number of ATMs that
banks operated increased about 13 percent, to an estimated 132,000; (3)
about 66 percent of this growth was in ATMs located off bank premises;
(4) survey results also indicated that, for the month of January, the
average number of customer withdrawal transactions per ATM declined 15
percent from 1997 to 1998, while the average number of noncustomer
withdrawal transactions per ATM declined 24 percent during this period;
(5) according to GAO's survey results, the percentage of banks operating
ATMs that assessed surcharges increased from 39 percent as of February
1, 1997, to 64 percent as of February 1, 1998; (6) also, the estimated
number of ATMs with surcharges increased by more than 50 percent during
the same period; (7) estimates indicated that the average surcharge fee
assessed by banks, including in the calculation the ATMs without
surcharges, increased from $0.69 as of February 1, 1997, to $1.00 as of
February 1, 1998; (8) additionally, the estimated average surcharge fee,
excluding ATMs that did not surcharge, increased from $1.17 to $1.27
during this period; and (9) for these ATMs, the most typical fee as of
February 1, 1998, was $1.50, compared to $1.00 the previous year.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-GGD-98-171
     TITLE:  Automated Teller Machines: Survey Results Indicate Banks' 
             Surcharge Fees Have Increased
      DATE:  07/15/98
   SUBJECT:  Savings and loan associations
             Insured commercial banks
             Fees
             Electronic funds transfer
             Computer networks
             Surveys

             
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Cover
================================================================ COVER


Before the Committee on Banking, Housing, and Urban
Affairs, U.  S.  Senate

For Release on Delivery
Expected at
10:00 a.m., EDT
on Wednesday
July 15, 1998

AUTOMATED TELLER MACHINES - SURVEY
RESULTS INDICATE BANKS' SURCHARGE
FEES HAVE INCREASED

Statement of Susan S.  Westin
Associate Director, Financial Institutions and Markets
 Issues
General Government Division

GAO/T-GGD-98-171

GAO/GGD-98-171T


(233564)


Abbreviations
=============================================================== ABBREV

  ATM - automated teller machine

AUTOMATED TELLER MACHINES:  SURVEY
RESULTS INDICATE BANKS' SURCHARGE
FEES HAVE INCREASED
====================================================== Chapter Summary

GAO's testimony, based on its April 1998 report,\1 discusses
information on automated teller machine (ATM) deployment and
surcharge fees assessed by banks and thrifts (hereinafter referred to
as banks).  ATM surcharge fees are assessed by some banks on
noncustomers--individuals who do not hold an account at their
institution. 

GAO conducted a statistically representative survey of about 500
randomly selected banks throughout the United States.  All of the
estimates are based on responses to this survey, which had a response
rate of 90 percent.  GAO did not include credit unions or
nondepository institution (nonbank) ATM operators in its survey. 
However, GAO did collect similar fee information on ATMs owned by
selected nonbanks. 

GAO's survey results indicated that approximately the same percentage
of banks in the United States operated ATMs as of February 1, 1998,
as operated them as of February 1, 1997--just over 70 percent. 
However, during this 1-year period the number of ATMs that banks
operated increased about 13 percent, to an estimated 132,000.  About
66 percent of this growth was in ATMs located off bank premises. 
Survey results also indicated that, for the month of January, the
average number of customer withdrawal transactions per ATM declined
15 percent from 1997 to 1998, while the average number of noncustomer
withdrawal transactions per ATM declined 24 percent during this
period. 

According to GAO's survey results, the percentage of banks operating
ATMs that assessed surcharges increased from 39 percent as of
February 1, 1997, to 64 percent as of February 1, 1998.  Also, the
estimated number of ATMs with surcharges increased by more than 50
percent during the same period.  Estimates indicated that the average
surcharge fee assessed by banks, including in the calculation the
ATMs without surcharges, increased from $0.69 as of February 1, 1997,
to $1.00 as of February 1, 1998.  Additionally, the estimated average
surcharge fee, excluding ATMs that did not surcharge, increased from
$1.17 to $1.27 during this period.  For these ATMs, the most typical
fee as of February 1, 1998, was $1.50, compared to $1.00 the previous
year. 


--------------------
\1 Automated Teller Machines:  Survey Results Indicate Banks'
Surcharge Fees Have Increased (GAO/GGD-98-101, Apr.  24, 1998). 


AUTOMATED TELLER MACHINES:  SURVEY
RESULTS INDICATE BANKS' SURCHARGE
FEES HAVE INCREASED
==================================================== Chapter Statement

Mr.  Chairman and Members of the Committee: 

We are pleased to be here today to discuss the results of our study
on automated teller machine (ATM) deployment and surcharge fees
assessed by banks and thrifts.\2 In this testimony I refer to both
types of institutions as banks.  As you requested, we updated our May
1997 report\3 on ATM fees assessed by banks on
noncustomers--individuals who do not hold an account at their
institution.  Such fees are called surcharge or access fees.  We
estimated that the percentage of ATMs with surcharge fees increased
from 59 percent as of February 1, 1997, to 79 percent as of February
1, 1998.  In addition, the average surcharge fee calculated for all
ATMs operated by banks increased from $0.69 to $1.00 over the same
period.  The most typical fee as of February 1, 1998, was $1.50,
compared to $1.00 the previous year. 

You asked us to summarize our survey data on changes over the past
year in (1) ATM deployment by banks in the United States and (2) the
number of banks that surcharge noncustomers and the amounts
surcharged.  We also collected similar information on ATMs owned by
selected nondepository institutions (nonbanks). 

To address our objectives, we conducted a statistically
representative survey of about 500 randomly selected banks throughout
the United States.  All of our estimates are based on responses to
this survey, which had a response rate of 90 percent.  In an effort
to obtain more precise estimates than we were able to include in our
1997 report, we expanded our sample from about 250 banks to about 500
banks.  We collected information from all the banks responding in
this year's sample as of February 1, 1998.  We also collected
February 1, 1997, information from the banks we surveyed this year
and used it to revise our 1997 estimates, taking advantage of the
larger sample to provide more precise estimates.  All estimates are
subject to sampling errors, which we reported if the errors were
greater than plus or minus 10 percent.  In addition, reported changes
in estimates from 1997 to 1998 are statistically significant unless
otherwise noted.  We did not include credit unions or nonbank ATM
operators in our survey. 

Regional, national, and/or international ATM networks link ATMs and
computer systems, allowing the customers of one network member to
access their accounts through other network members' ATMs.  Until
April 1996, the two primary national networks banned the practice of
surcharging noncustomers for the use of their networks' ATMs. 
However, the bans could not be implemented in 15 states that
statutorily prohibited ATM networks from enforcing them.  With other
states considering similar prohibitions, the two primary networks
lifted their bans in April 1996.  Since then, some ATM operators in
states where surcharges were formerly banned by the networks have
begun assessing surcharges. 

ATM operators assess surcharge fees on the user's bank; the bank in
turn pays the fees and then assesses them directly on the user.  The
national networks require that, if the surcharge fee is assessed on
the user, the fee appear on the receipt at the cash machine as well
as on the user's bank statement. 

In addition to surcharge fees, switching and interchange fees are
charged for ATM use.  A switching fee is assessed by the ATM network
on the user's home bank to pay for processing each of its network
transactions and to defray other network operating costs, such as
advertising and network security.  Banks may absorb this fee or pass
it on to the ATM user.  An interchange fee may be assessed by ATM
operators on a nonaccount holder's home bank for handling a
transaction.  If the home bank passes this fee on to the ATM user,
the Federal Reserve's Regulation E requires the user's home bank to
inform the user that the assessment will appear on the user's bank
statement. 


--------------------
\2 The detailed results are presented in Automated Teller Machines: 
Survey Results Indicate Banks' Surcharge Fees Have Increased
(GAO/GGD-98-101, Apr.  24, 1998). 

\3 See Automated Teller Machines:  Banks Reported That Use of
Surcharge Fees Has Increased (GAO/GGD-97-90, May 16, 1997). 


   ATM DEPLOYMENT BY BANKS
-------------------------------------------------- Chapter Statement:1

According to our survey results, just over 70 percent of banks in the
United States operated ATMs as of both February 1, 1998, and February
1, 1997.  We estimated that approximately 8,010 of 10,960 banks
active at the time of our survey operated ATMs as of February 1,
1998; and approximately 8,210 of 11,110 banks operated ATMs as of
February 1, 1997. 

Banks operated an estimated 132,000\4 ATMs in the United States as of
February 1, 1998, a 13 percent increase over the estimated 117,000\5
ATMs they operated as of February 1, 1997.\6 About 66 percent of this
growth was in ATMs located off bank premises.  Additionally, large
banks operated more ATMs than either medium or smaller banks as of
February 1, 1998.\7 The percentages of ATMs operated by large,
medium, and smaller banks as of February 1, 1997, and February 1,
1998, are presented in appendix I. 

According to our survey results, for those large banks that operated
ATMs, the median\8 number of ATMs operated increased by about 100
from February 1, 1997, to February 1, 1998--from 345 to 440.  The
median number of ATMs operated by medium and smaller banks was 43 and
3, respectively as of February 1, 1998--approximately the same median
number as they operated the previous year. 

Our survey results also indicated that, for the month of January, the
average number of customer withdrawal transactions per ATM declined
15 percent from 1997 to 1998, while the average number of noncustomer
withdrawal transactions per ATM declined 24 percent during this
period. 


--------------------
\4 Sampling error is plus or minus 12 percent. 

\5 Sampling error is plus or minus 11 percent. 

\6 Point estimates are subject to a sampling error that differs from
the sampling error on our estimates of the change between 1997 and
1998.  Although the confidence intervals on the point estimates may
overlap, the estimate of the change between the 2 years is
statistically significant. 

\7 We categorized banks as large, medium, and smaller and defined
these categories as banks with assets of over $10 billion, $1 billion
to $10 billion, and less than $1 billion, respectively. 

\8 The median is the middle observation--that is, half the
observations lie above this value and half lie below it. 


   MORE BANKS ASSESSED SURCHARGES
   AND FEES INCREASED
-------------------------------------------------- Chapter Statement:2

Our survey results indicated both that a greater percentage of banks
assessed surcharges as of February 1, 1998, than did a year before
and that the number of ATMs with surcharges increased.  Almost 64
percent of banks that operated ATMs as of February 1, 1998, assessed
surcharges on at least some of their ATMs, while about 39 percent of
the banks that operated ATMs as of February 1, 1997, imposed
surcharges.  Additionally, the number of ATMs with surcharge fees
increased by more than 50 percent--from about 69,100\9 to about
104,100\10 ATMs during this period.  This represents an increase from
59 percent to 79 percent of ATMs.  The increase included newly
deployed or acquired ATMs, as well as existing ATMs that previously
did not have a surcharge fee. 

According to our 1998 survey results, the average ATM surcharge fee
has also increased since February 1, 1997.\11 Our estimates indicated
that the average surcharge fee assessed by banks, including in our
calculations the ATMs without surcharges, increased from $0.69 as of
February 1, 1997, to $1.00 as of February 1, 1998.\12 The average
surcharge fee as of December 31, 1995, was $0.17.\13 This was before
the two primary national networks lifted their ban on surcharge fees. 
In addition to the previously discussed average fees, the estimated
average surcharge fee assessed by banks, excluding ATMs that did not
surcharge, increased from $1.17 as of February 1, 1997, to $1.27 as
of February 1, 1998.  The maximum ATM fee reported by banks in our
sample as of both dates was $3.00. 

Our survey results also indicated that for the ATMs with surcharges,
the most typical fee as of February 1, 1998, was $1.50 compared to
$1.00 for the previous year.  Additionally, these results indicated
that the number of ATMs with surcharge fees of $1.50 or more had
increased since 1997.  Specifically, an estimated 21 percent of ATMs
had fees of $1.50 or more as of February 1, 1997, and an estimated 40
percent of ATMs had such fees as of February 1, 1998.  Appendix II
provides more specific data on the percentages of banks that assessed
surcharge fees, average surcharge fees, and the percentage of ATMs
with various surcharge fees. 


--------------------
\9 Sampling error is plus or minus 15 percent. 

\10 Sampling error is plus or minus 15 percent. 

\11 We calculated average surcharge fees on a per ATM basis rather
than on a per bank basis. 

\12 Actual surcharge fees tend to occur in 50-cent increments (e.g.,
$1.00, $1.50, and $2.00).  However, a commonly used measure of
surcharge fees throughout the industry is a simple average.  We
calculated the average surcharge fee in two ways:  for all ATMs,
including those with no surcharge fees, and for only those ATMs with
surcharges. 

\13 Sampling error exceeds plus or minus 10 percent. 


   SELECTED NONBANKS ALSO
   INCREASED FEES
-------------------------------------------------- Chapter Statement:3

Consistent with the results of our bank survey, the seven large
nonbanks that provided us information generally reported increases in
the number of ATMs owned, the number of ATMs with access fees, and
the average access fee.\14 Specifically, these nonbanks reported an
11 percent increase in the number of ATMs they owned--from 9,223 ATMs
to 10,277 ATMs--between February 1, 1997, and February 1, 1998. 
During the same period, the 7 nonbanks reported a 61 percent
increase--from 5,056 to 8,120--in the number of ATMs they owned that
charged users an access fee.  The average fee, including in our
calculations the ATMs without access fees, increased from $0.48 on
February 1, 1997, to $0.81 on February 1, 1998.  The average fee,
excluding ATMs that did not charge a fee, increased from $0.87 to
$1.03 over the same period.  The maximum access fee reported by these
nonbanks was $8.00. 


--------------------
\14 When referring to nonbanks, we use the generic term access fee
rather than surcharge fee.  Surcharge fees refer to the access fees
that banks charge individuals who do not hold an account at their
institution.  However, nonbanks do not have deposit account holders. 


------------------------------------------------ Chapter Statement:3.1

This concludes my prepared statement.  I will be happy to respond to
any questions you or other members of the Committee may have. 


ATM DEPLOYMENT
=========================================================== Appendix I

   Figure I.1:  Percentages of
   ATMs Operated by Large, Medium,
   and Smaller Banks as of
   February 1, 1997, and February
   1, 1998

   (See figure in printed
   edition.)

Note:  Percentages may not add to 100 due to rounding. 

Source:  GAO analysis of survey results. 


ATM SURCHARGE FEES
========================================================== Appendix II

   Figure II.1:  Percentages of
   Large, Medium, and Smaller
   Banks That Assessed Surcharges
   on at Least Some of Their ATMs
   as of February 1, 1997, and
   February 1, 1998

   (See figure in printed
   edition.)

\a Sampling error is plus or minus 11 percent. 

Source:  GAO analysis of survey results. 

   Figure II.2:  Average ATM
   Surcharge Fees Assessed by
   Large, Medium, and Smaller
   Banks, Including ATMs Without
   Surcharges, as of December 31,
   1995; February 1, 1997; and
   February 1, 1998

   (See figure in printed
   edition.)

Note 1:  We collected December 1995 data during our 1997 survey.  We
did not collect additional 1995 data during our 1998 survey. 
December 1995 estimates were based on the responses of banks we
surveyed in February 1997. 

Note 2:  Although some of the sampling errors for the data for
smaller, medium, and large banks were greater than plus or minus 10
percent, all of the differences between the 1995 and 1997 data within
the three size groups were statistically significant, and the
differences for the smaller and large banks between 1997 and 1998
were also statistically significant. 

Note 3:  The average ATM surcharge fees were calculated for all ATMs,
including those that did not surcharge. 

Source:  GAO analysis of survey results. 

   Figure II.3:  Average ATM
   Surcharge Fees Assessed by
   Banks, Excluding ATMs Without
   Surcharges, as of December 31,
   1995; February 1, 1997; and
   February 1, 1998

   (See figure in printed
   edition.)

\a Sampling errors is plus or minus 12 percent. 

Note 1:  We collected December 1995 data during our 1997 survey.  We
did not collect additional 1995 data during our 1998 survey. 
December 1995 estimates were based on the responses of banks we
surveyed in February 1997. 

Note 2:  The average ATM surcharge fees were calculated for only
those ATMs with surcharges. 

Source:  GAO analysis of survey results. 

   Figure II.4:  Percentages of
   ATMs With Various Surcharges as
   of February 1, 1997, and
   February 1, 1998

   (See figure in printed
   edition.)

\a Includes all other fee levels combined. 

Source:  GAO analysis of survey results. 


*** End of document. ***