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UBC Theses and Dissertations

Transaction fees in banking machine networks : a spatial and empirical analysis Croft, Elizabeth W.


This thesis concerns the effects of network member features on the pricing of automated teller machine (ATM) transactions. The first chapter outlines the development of ATM networks and provides an institutional and public policy backdrop for the theoretical and empirical analysis in the thesis. ATM fees have recently received increased attention in North America due to the Interac abuse of dominance case in Canada and the widespread introduction of surcharge fees at ATMs in the United States. In Chapter 2, a new circular spatial model of ATM networks is developed and used to analyze the pricing preferences of banks when choosing to link their proprietary ATM networks into a shared network. This model captures the consumer trade-off between the inconvenience of travelling to a machine of their own bank and the fee charged to use the machine of a rival bank. In this chapter, there are two banks, which differ only with respect to the size of their client bases. The results show that the smaller bank's preferred common transaction fee always exceeds that of its larger competitor. The bank with the larger client base will always choose to link networks provided that the common fee charged by both banks is non-negative. For both banks there is always a range of common fees for which there is mutual gain from linking the networks. When surcharges are allowed, both banks have an incentive to raise fees above the common fee that was charged previously. In Chapter 3 the model is adapted to consider the effects of an asymmetry in the number of machines owned by each bank. For the same client base in each bank, the results show that the bank with the larger number of machines prefers a higher common fee than does its rival. When surcharges are allowed, the bank with the larger number of ATM machines will choose to price discriminate by location of machine. Such behaviour has been observed in the United States.

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