Reimbursing ATM Fees – David Versus Goliath Competitive Strategy

Last spring a number of large banks such as Bank of America and SunTrust Bank boosted their out-of-network fees to about $2.50. Some banks also moved to raise the charge for non-customers making cash withdrawals to up to $5.

That means that the total expense for gaining access to, for example, $100 could be $7.50. Frequently, the amount withdrawn is ever lower, especially by college students living away from home. For the $20 they need for fun that night they could be paying an additional one-third in fees.

If that happens several times a month, you’re talking big money to no-income consumers such as college students along with middle-income ones. That’s why it’s such a successful perk for the Davids and upstarts among financial institutions to attract and keep accounts. Increasingly, small and regional banks, credit unions and online banks promote themselves by reimbursing those fees, which continue to go up.

Not only is this a competitive tactic, it also saves them money from having to build and maintain more ATMs. According to ABCnews.com, providing an ATM not directly attached to the financial institution runs about $15,000 a year.

There’s also the image payoff. They don’t appear hell-bent on maxing profit through every transaction. Instead they seem to be looking out for the little guy. That branding is useful to establish the kind of trust that makes them the first stop for a business loan, mortgage or retirement account. This can be especially effective building a lifetime bond with college students.

Like most perks in banking, this one demands reading the fine print. It might be offered just during a special promotional period, and afterwards, the consumer is out of luck. Or there could be limits to the number of transactions or the amount withdrawn each month.

However, this competitive move is threatened by technology. The smartphone, for example, can identify all the ATMs in a certain area. Account holders of large banks willing to walk a few blocks will likely find their own financial institution and the Goliaths maintain their hold on the marketplace.