Consumers may be charged two  types of fees. Finally, the acquiring fee is paid by the ATM owner to the  EFT networks for use of the networks to conduct the ATM transaction. Financial institutions operate ATMs as a convenience to their own  account holders, who generally do not pay fees to use these ATMs. Financial Institutions Operate ATMs Primarily for Their Own Account Holders, Often with No Fees

According to industry estimates, there are approximately 420,000 ATMs  currently operating in the United States, and financial institutions operate  just under half of those machines, either in their own facilities or at off-site  locations, such as shopping centers, drug stores, and grocery stores. Most independent ATM operators charge a surcharge fee to  consumers for the convenience of accessing their account from a  machine outside their bank’s ATM network. ATM Surcharge Fees Assessed by Financial Institutions Have Increased, While Foreign Fees Remained Constant

Our analysis shows that the prevalence and amount of ATM surcharge  fees levied by financial institutions have generally increased since 2007,  while foreign fees have generally remained constant in prevalence and  amount, as seen in figure 2. Of those institutions that  charged a surcharge fee, the estimated average ATM surcharge fee  increased from $1.75 in 2007 to $2.10 in 2012. Surcharge  fees charged by financial institutions in our sample ranged from $0.28 to  $5.52 in 2007, and the range was $0.45 to $5.00 in 2012. In 2012, the estimated  average surcharge fee for larger financial institutions was approximately  $0.24 higher than the estimated average surcharge fee for smaller  financial institutions, and banks’ estimated average surcharge fees were  also $0.17 higher than the estimated average surcharge fees charged by  credit unions. However, we analyzed data from Informa Research Services  on the fees charged by a judgmentally selected sample of 100 ATMs run  by independent ATM operators in 2012. The  surcharge fee ranged from $1.50 to $3.00. However, some independent  ATMs may have surcharge fees that are higher or lower than those in our  sample. However, data obtained by  mystery shoppers from a sample of 100 judgmentally selected  independent ATMs in the top 10 metropolitan statistical areas, show that  most of these ATMs charged a surcharge fee to the mystery shopper, but  some transactions were conducted surcharge free. Consumers Have Many Ways to Obtain Cash without Incurring Fees

To obtain cash without incurring fees, consumers can generally withdraw  cash at a bank branch during banking hours or use ATMs in their bank’s  network. Additionally, some financial institutions participate in surcharge-free  networks that allow their customers free access to ATMs outside their  bank’s network of ATMs. In this way, a financial institution can expand the  number and location of ATMs available to its customers. Infrastructure and processing. None of the  data we collected on costs are generalizable to either the financial  institution or independent ATM operator populations at-large, although  some costs, such as hardware and software investments, were  mentioned as key drivers by many of the operators included in our work. Our analysis of the data collected from a sample of 30 institutions from  three financial institution types—large bank, medium bank, and credit  union—revealed some key differences in the biggest cost drivers for  these ATM operators. Increasing Costs and Declining Revenues Are Prompting Some Changes in ATM Operations

Most operators included in our study—financial institutions and  independent firms—reported that overall ATM costs have increased over  the past 5 years and they expect that they will continue to do so. In contrast, 6 operators reported  that revenues remained about the same, and 4 reported a slight increase  during that same period. Specifically, the objectives  of this report are to discuss (1) the business models for ATM operators— financial institution and independent firms—and how they set ATM fees,  (2) the amounts of fees that consumers incur to conduct ATM  transactions and how these fees changed over time, and (3) the reported  costs of ATM operations for financial institution and independent ATM  operators and how costs and revenues are expected to change. To discuss the operations and costs for ATM operators, in addition to the  interviews discussed above, we surveyed a nonprobability sample of  financial institutions and independent firms that operate ATMs to collect  information on
ATM operations and business models,
ATM transaction levels for calendar year 2011,
ATM costs for calendar year 2011 in 12 specific cost categories, overall ATM cost and revenue trends for the past 5 years and in the  future, and  factors ATM operators consider when setting ATM fees. To report on the amounts of fees that consumers pay to conduct  transactions at financial institution ATMs, and how these fees changed  over time, we purchased and analyzed data on surcharge and foreign  ATM fees charged by banks and credit unions from 2007 through 2012  from Moebs $ervices, Inc. (Moebs), a market research firm that  specializes in the financial services industry.
Why GAO Did This Study

Since the 1960s, consumers have increasingly used ATMs to easily access their accounts and conduct transactions such as cash withdrawals. Consumers may incur fees to use ATMs, such as a surcharge fee, which is paid to the ATM operator for transactions conducted at ATMs outside their financial institutions network. In 2008, GAO reported that ATM surcharge fees had increased since 2000. GAO was asked to review issues related to continued increases in these fees.
This report discusses (1) the business models for ATM operators and how they set ATM fees, (2) the amounts of fees that consumers incur to conduct ATM transactions and how these fees have changed over time, and (3) the reported costs of ATM operations for ATM operators and how the costs and revenues are expected to change.
For this work, GAO surveyed a nongeneralizable sample of 30 financial institutions and 4 independent ATM operators to collect information on their ATM operations and costs in calendar year 2011. In addition, GAO analyzed two types of ATM fees data obtained from firms specializing in the financial services industry: (1) data on fees charged by financial institutions from 2007 to 2012 that are generalizable to all financial institutions in the United States, and (2) nongeneralizable data on fees charged by independent ATM operators that were procured by mystery shoppers at 100 judgmentally selected independent ATMs in 2012. GAO also interviewed industry representatives and federal regulators to understand ATM operations and requirements.

What GAO Found

Automated teller machine (ATM) operators include financial institutions--banks and credit unions--as well as independent firms. Industry representatives GAO spoke with estimate there are approximately 420,000 ATMs in the United States. They estimate that financial institutions operate and set the fees for about half of the market, and independent operators work together with merchants to operate the remainder and to determine the fees incurred by consumers. ATM operators have differing business models that affect the way they set ATM fees for consumers. Financial institutions operate ATMs as a convenience to their own account holders, who generally do not pay fees to use these ATMs, while non-account-holding customers do. At independent ATMs, most consumers incur a surcharge fee, although there are some exceptions, such as when the ATM is part of a surcharge-free ATM network.
GAO estimates that the prevalence and amount of ATM surcharge fees charged by financial institutions have increased since 2007, and that the estimated average surcharge fee for financial institutions that charged a fee increased from $1.75 in 2007 to $2.10 in 2012, in 2012 dollars. In 2012, surcharge fees charged by financial institutions ranged from $0.45 to $5.00. GAO's analysis of a nongeneralizable sample of 100 ATMs run by independent operators found that the average surcharge fee was $2.24 and ranged from $1.50 to $3.00 in 2012. However, some independent ATMs may have surcharge fees that are higher or lower than those in GAO's sample. In contrast, GAO estimates that the foreign fee--the fee assessed by financial institutions for using an ATM outside the institution's network--generally stayed constant in dollar amount over this period. Consumers have many ways to obtain cash without incurring fees, such as using ATMs within their financial institution's network. Additionally, some financial institutions participate in surcharge-free networks that allow their customers free access to ATMs outside their institution's ATM network. These networks can greatly expand the number and location of ATMs available to consumers free of charge.
GAO's analysis of the ATM cost data reported by a nongeneralizable sample of financial institutions it surveyed revealed some differences in the biggest cost drivers for ATM operations. For example, large banks' reported costs for hardware and software investments were higher as a percentage of their reported total ATM costs than for the midsize banks and credit unions. Key cost drivers reported by the nongeneralizable sample of independent ATM operators varied, but commonly reported costs were rent, infrastructure, and transaction processing. In addition, most of the surveyed ATM operators reported that overall per-ATM costs have increased over the past 5 years, while per-ATM revenues have declined. Many of the operators GAO contacted believe that ATM operation costs will continue to rise in the future and that revenues will be flat or decline.