THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, August 4, 1996 TAG: 9608030516
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: 158 lines
A decade ago, they were an option. Today, automated teller machines are considered essential by most banks in Hampton Roads.
``You've got to have ATMs. People want access to their money 24 hours a day, seven days a week,'' said John M. Chattleton, executive vice president at Virginia Beach Federal Savings Bank.
But for some ATM users, speedy access to their cash is getting more expensive.
Since early April, a third of the banks doing business in Hampton Roads have imposed a $1 surcharge on noncustomers who use the banks' teller machines. These include NationsBank, Central Fidelity National Bank, and First Virginia Bank - institutions that have dozens of ATMs in the region.
More banks in the region are likely to join the trend in ATM surcharges. Virginia Beach Federal and Jefferson National Bank said they are monitoring consumer reactions and will consider doing so.
Paying an added fee for a cash withdrawal doesn't sit well with some bank customers. The proliferation of surcharges has prompted Jim Ruiz and Keith Johnson to use ATMs differently.
``It has increased my use of check-writing,'' said Ruiz, a Virginia Beach resident. To avoid a surcharge, he also looks around for ATMs of banks that do not impose a surcharge.
Johnson, an Atlanta resident vacationing in Norfolk last week, said he has reduced the frequency of his cash withdrawals by taking out larger amounts with each ATM transaction.
Customer resistance is showing up at MOST, a regional network that ties together 8,500 ATMs owned by financial institutions throughout the middle Atlantic and Southeast.
Last month, MOST witnessed a 6 percent decline in ATM transactions from its volume in July 1995.
In addition, the 10 million ATM transactions for July were off 15 percent from the 11.5 million that MOST expected for the month, said Richard G. Lyons Jr., executive vice president and chief operating officer of Internet Inc., MOST's Reston-based parent.
``It's the first time this has happened,'' Lyons said. ``I would attribute virtually all of the decline to surcharging.''
Bankers, however, are betting that any downturn in ATM usage will be temporary.
From the evidence in 15 states where ATM surcharges were permitted before April 1, consumers eventually accept the charge, said Kere Lewis, executive vice president of the consulting firm Speer & Associates in Atlanta. ``It might cause a slight dip in ATM usage, but usage will continue to grow,'' he said.
The new surcharges don't apply to consumers who use an ATM owned by the bank where they have an account. But when they tap into another bank's ATMs, they may have to pay twice: once to their own bank and then to the bank that owns the machine.
For example, a Central Fidelity customer withdrawing cash from a NationsBank ATM ends up paying $3 for the transaction. Central Fidelity collects a $2 fee, which is shared with NationsBank and the ATM network that connects the two banks. In addition, NationsBank collects $1 from the Central Fidelity customer for using a NationsBank machine.
The added cost of ATM transactions has angered more than bank customers. It has provoked complaints from smaller banks and credit unions, which fear losing customers to large banks that have many more machines.
``For the compulsive ATM user, the presence of a surcharge could determine where they have their checking account,'' said Nelson R. Arnold, senior vice president for retail banking at Life Savings Bank in Norfolk.
In Washington, members of Congress have responded to the complaints by holding hearings and writing bills. One measure in the Senate would bar banks from applying a surcharge on ATM transactions. A bill in the House would require banks using a surcharge to post notices on their ATMs and on the screens during a transaction.
The American Bankers Association, a lobbying organization for larger banks, has opposed both bills.
``We believe that market forces should decide the prices of products. We don't think the legislation is necessary,'' said John L. Hall, a spokesman for the association.
But U.S. Public Interest Research Group, a consumer advocacy group, endorses a surcharge ban, arguing that the surcharges have made it more difficult for consumers to shop for banking services.
NationsBank and others imposing ATM surcharges say they need the added revenue to expand their teller-machine systems and to meet customer demand for convenience. Since mid-1995, NationsBank has added 1,100 ATMs, bringing its total to 3,333 machines.
``By year end, we expect that number to be 3,800,'' said Melba Spencer, a spokeswoman for the Charlotte-based bank.
First Union, with 2,100 ATMs, said it plans to install another 500 by the end of 1996.
At NationsBank and other institutions, the goal is to install more machines in high-traffic locations away from bank branches. Some banks, including Central Fidelity, Virginia Beach Federal, and CENIT Bank, have resorted to supermarkets and discount stores. Others have turned to workplaces.
Old Point National Bank in Hampton has arranged to put an ATM in the new headquarters of Ferguson Enterprises Inc., a Newport News-based distributor of plumbing, heating and cooling equipment.
Despite the debate between bankers and consumer activists over the fairness of surcharges, it's clear that ATMs are becoming important sources of bank income. The principal source of bank earnings, their interest income from loans and investments, has come under pressure from intense competition. Many banks have responded by boosting their fees, service charges and other sources of non-interest income.
Banks, including a handful in Virginia, began installing ATMs in the 1970s to provide convenience while holding down the cost of operating branches. But the machines weren't widely accepted until ATM networks emerged. Networks like MOST and Plus began tying together ATMs owned by hundreds of banks, which enabled customers of one bank to use more convenient ATMs owned by another institution.
To promote consumer acceptance, ATM networks held contests, sweepstakes and giveaways. They also barred member banks from imposing surcharges on noncustomers who used their machines. But by the early 1990s, many banks clamored for an end to that ban.
Fifteen states, including Texas, Georgia and Utah, eventually enacted laws prohibiting networks from banning ATM surcharges. Virginia and North Carolina are not among them.
On April 1, Visa's Plus network scrapped its prohibition against surcharges. Cirrus, a rival national network owned by MasterCard, and most ATM regional networks took the same action.
Before applying an ATM surcharge, financial institutions must get approval from the ATM networks. The networks, however, have no control over how much a bank charges noncustomers using its machines. It's possible that the $1 fee now common in Hampton Roads could increase.
But the growing number of ATMs available to customers may prompt competing banks to hold off on surcharge increases in some markets. Already, there are signs of an ATM saturation. After falling in 1993 and again in 1994, the number of monthly transactions per teller machine edged up 3 percent to 6,580 last year in the United States.
The 1995 number was down more than 4 percent from a peak of 6,876 monthly transactions per ATM in 1992, according to the trade publication Bank Network News.
Dozens of additional machines are scheduled to be installed in Hampton Roads within the next year or so:
Virginia Beach Federal, for example, has plans for 4 to 6 more, including 3 by the end of the first quarter of next year, said Chattleton, head of the thrift's retail banking.
CENIT Bank, with 14 ATMs in the region, said it will add three more by October. Life Savings does not yet have any of its own machines but expects to install 6 to 9 ATMs during the next 12 months.
Navy Federal Credit Union, which has a worldwide network of ATMs, plans to add machines in Hampton Roads.
``We're looking at sites in Chesapeake, Portsmouth and on the Peninsula,'' said Jeff Dombroff, vice president of field operations at the Vienna-based credit union.
Atlantic Fleet Federal Credit Union, with five ATMs in Norfolk and Virginia Beach, expects to install another dozen machines during the next two years. The use of surcharges on noncustomers has spurred Atlantic Fleet's ATM expansion effort, said Agnes Parker, marketing director at the Norfolk credit union.
``We would still be installing new ATMs,'' she said, ``but I don't think we would be doing it as aggressively.'' ILLUSTRATION: Graphics
TIPS ON HOLDING DOWN ATM COSTS
AUTOMATED TELLER MACHINES AND FEES AT SOME HAMPTON ROADS FINANCIAL
INSTITUTIONS
[For complete graphics, please see microfilm] by CNB