EVIDENCE SUGGESTS REGIONAL CUSTOMERS WILL BENEFIT FROM PROPOSAL TO CHANGE ATM PRICING REGIME

Sydney, 22 July, 2003: The Australian Bankers’ Association said recent claims[1] that regional Australia will be disadvantaged by the proposal to eliminate the interchange fee on ATM transactions are contradicted by the evidence.

For many years, consumer advocates and politicians have wanted better disclosure of ATM fees to consumers. By eliminating the ATM interchange fee and charging users directly, as proposed by regulators to banks, building societies and credit unions, consumers will be empowered to make more informed decisions.

In addition, the evidence suggests that the new proposal will increase the supply of ATMs throughout Australia, particularly in under serviced areas like regional and remote Australia. As in all markets, an increase in supply has two effects (a) puts downward pressure on prices of existing services, and/or (b) provides new services to consumers who previously did not have access to those services.

Other reports highlighting the benefits of the new ATM proposal and its timely introduction

1. The benefits of replacing ATM interchange fees with a direct charging model are discussed by the Reserve Bank of Australia (RBA) and Australian Competition and Consumer Commission (ACCC) in a study[2] they released in October 2000. The regulators wrote:

“The attractions of a direct charging regime are that it may encourage transaction fees more in line with costs, and promote transparency. For a start, it puts the ATM owner in a direct economic relationship with the cardholder, rather than only an indirect one via the issuer. If the consumer is to exert any direct influence on pricing – for example, by patronising the less expensive ATMs – this regime would achieve it more effectively than the present system.”

2. Another useful document is a Discussion Paper produced by the ATM Industry Steering Group, to consult widely with the community on this proposal. This can be accessed on the Reserve Bank’s website at www.rba.gov.au.

3. The RBA also recently stated[3] that it strongly supports proposed reforms to ATM networks and said the sensible timetable for ATM reforms is as soon as practicable after debit card reform. This case is outlined in the annual report of the Payments System Board (PSB) – the regulator of the payments system that sits within Australia’s central bank.

Additional notes for editors on why claims that the new ATM pricing model will lead to consumers being worse off run contrary to market reality

There are a range of market realities that ensure that ATM charges will not be inappropriately priced:

1.         There will be more ATMs providing more competition;

2.         The vast majority of rural ATM users will not be affected by the new proposal, because they use their own bank’s ATM. The new proposal only affects users of ‘foreign’ ATMs i.e those ATMs not owned by their own bank, building society or credit union.

3.         If an ATM owner tries to charge too much, customers will migrate to other forms of payment such as: cheques, BPay, credit cards, debit cards (EFTPOS) or telephone banking; and

4.         The customer migration impact will be even stronger because under the new proposal, all ATM ‘foreign’ transaction fees will be disclosed on the screen before the customer actually commits to the transaction.

For further information:

Heather Wellard

ABA Public Relations

Phone: 02 8298 0411

Mobile: 0409 830 439

ENDS