A Brief History of Atms

A Brief History Of ATMs

ATMs have been around for almost a quarter of a century, but fees, especially double fees, for using them are a more recent phenomenon.

When ATMs were introduced in the 1970s, they were set up only inside or immediately outside their banks' branch offices. They were seen by banks largely as a way of saving money, by reducing the need for tellers. Even with the relatively expensive computer technology of the late '70s and early 80s, the cost of processing deposits and withdrawals via ATMs proved to be less than the cost of training and employing tellers to do the same work.

To encourage customers to embrace the technology and overcome their trepidations about putting their checks into a machine's slot rather than a teller's hands, banks originally didn't charge customers any fees for using ATMs. (Indeed, in time, some banks started charging customers for not using ATMs, through so-called "human teller fees" - a charge for each time a customer uses a teller for a service that could be performed by an ATM.)

Banks that embraced the ATM profited handsomely, often growing far faster than old-fashioned banks in the effort to get business from ordinary Americans.

At first, a bank's ATMs could only be used by consumers who already had checking or savings accounts with that bank, through the bank’s "proprietary ATM network."

However, by the early 80s, banks began to take advantage of improvements in telecommunications technology and formed "shared ATM networks" with other banks, allowing customers of one bank to withdraw money by using ATMs of other banks. Banks paid other ATM owners "interchange" fees, to cover the marginal cost of the "off-us" transactions by its customers on the owner's machines. Banks paid the network a "switch" fee per transaction, plus an annual "membership" fee, to cover the costs of the network. Originally, these fees were not directly passed onto consumers.

After all, from the perspective of a bank, banks that joined the network could advertise that their customers could get access to their money from far more locations than those banks who didn't belong. Yet, the bank would not only not have to pay for tellers; it wouldn't have even have to pay for the cost of building and maintaining most of the extra ATMs from which customers could access their funds. Big banks, seeking to maximize the value of the new shared networks, urged small banks to join, arguing that joining the network would be much less expensive for a small bank than building a competing network. But the big banks weren’t totally altruistic, even then. They needed to increase usage of their own machines to justify their own expense, and could do so most easily by adding volume from non-customer transactions.

At this point, some banks realized that many people were essentially hooked on ATMs and would be willing to pay some small amount of money to use them, especially when they were travelling. The banks were fortunate that this period coincided with an era of high anxiety about crime and a fear of carrying around large amounts of money.

Consequently, a number of banks slowly began to charge fees. However, originally, the networks themselves prohibited double fees, or surcharges. Some networks even feared that double surcharges would "kill the goose that laid the golden egg."

In the mid-1980s, then, some banks began imposing a fee on their customers for using another owner's ATM. These so-called "foreign" or "off-us" fees became more common in the 1990s.

By the early '90s, using ATMs had become an everyday part of life for a large percentage of Americans. Young people barely even knew what it was like to hand a deposit slip to a teller and ask for their $100 withdrawals in a mix of $5s, $10s, and $20s.

ATMs have been around for almost a quarter of a century, but fees, especially double fees, for using them are a more recent phenomenon.

When ATMs were introduced in the 1970s, they were set up only inside or immediately outside their banks' branch offices. They were seen by banks largely as a way of saving money, by reducing the need for tellers. Even with the relatively expensive computer technology of the late '70s and early 80s, the cost of processing deposits and withdrawals via ATMs proved to be less than the cost of training and employing tellers to do the same work.

To encourage customers to embrace the technology and overcome their trepidations about putting their checks into a machine's slot rather than a teller's