“Cash Cow” or the ‘goose that laid the golden egg,’ has there ever been anything more profitable than the Automated Teller Machine (ATM)? They have been in existence since the late 70s and were introduced as a means to save the banks money, which they did by eliminating tellers, not having to hire, train or pay their salaries. At the inception of the ATMs, there were no fees involved and for a while some banks even charged their customers for not using them. This was especially true, if it was a transaction that could be taken care of at the machine. These fees were known as “human teller fees.”
In the early stages, banks encouraged their customers and society in general to use the technology, but many felt anxious about putting their check into a machine for fear it would be lost or not retrieved timely; something that happened to me on one occasion. Other folks were confused and wonder why a machine? Some initially refused the technology, fearful of being robbed while standing on the street taking money from a machine.
Nevertheless, the technology quickly gained traction; banks eliminated tellers and the associated overhead and began to ratchet up tremendous profits. The technology grew and gained the trust and confidence of ordinary people.
As times passed, more banks begin to see the advantage of the technology and in the early 80s formed the shared telecommunications ATM networks which allowed customers to withdraw money from other banks where they had no personal account. The banks paid each other in the network a “switch” fee for each transaction. The banks were also required to pay an annual membership for network use. Later, these fees would be passed on to the banks’ customers.
In the 80s, not only did the banks save money, but their profits began to increase. The public slowly became comfortable with the new technology and realized the convenience. Banks seized upon the opportunity and begin charging fees. Those who had accounts with their bank were allowed to withdraw money without fees through what was known as the proprietary ATM Network; but those same customers were charged “off-us fees” when they used another bank to withdraw money even though they were already being paid by the network bank (double dipping) for same.
Once the cash cow had a solid footing, banks begin advertising that their customers could get access to their money from any bank within the network. Big banks alerted smaller ones of the advantages and urged their participation in efforts to gain volume and fight off any emerging competitions. The more banks outside the network who joined, the more volume it meant, and the more volume, the more money earned from those who withdrew from outside their own banks. Big banks had more of these cash cows than smaller ones which meant consumers paid lower fees and could even use international banks when traveling. ATMs were especially convenient since some liked the idea of not having to travel with cash in pocket.
Slowly fees begin rising, but some banks resisted the ATM surcharges while other bank fought to enact laws allowing them. Those banks that resisted did so out of fear that extra charges would cause some consumers to stop using ATMs, other feared political backlashes, still others thought that the double dipping was a bit over the top. There was also pressure from small banks and credit unions who offered lower fees. Nevertheless, in the mid-90s the big networks succumbed to the pressures and began to allow the surcharges. Many of the smaller banks and credit unions were adamantly against this but as time passed realized that they could profit from the surcharges that the new ATMs would bring.
It was the 90s and the “cash cow” was so common that most in society wondered what they had done for pocket change before they came into existence.
It’s now more than 40 years later and what started out as an effort to save banks money by letting them eliminate tellers and save on the cost of hiring, training, salaries, benefits has reap them billions of dollars in profits. Fees have now tripled, and there is a whole new generation that has never had contact with a bank teller.
The system is rigged to enrich all except you and me. According to statistics, the average cash cow transaction fee is minimal, about $.035 and includes amortized cost of equipment, telecommunications and personnel to oversee operations. There is a “foreign” fee which covers the cost of the “interchange” and “switch” fees also minimal, pennies on the dollars, leaving the customers’ bank to pocket the rest of each ATM fee that we are charged. Imagine the billions of dollars made as millions of consumers withdraw funds daily from ATMs.
Nevertheless, banks continue to send millions to politicians in campaign contributions each year while their lobbyists continue to lobby Congress in efforts to impose even more fees on unsuspecting consumers.
What banks and their lobbyists won’t tell Congress is that not only are banks saving money by not having to hire tellers, train them, pay salaries and benefits, but they are “being more than compensated for the cost of the machines through the interchange fee that the non- customers’ banks are already paying them.” They are being “compensated even if the non-customer’s bank doesn’t charge its customer an “off-us fee.” It’s “because the non-customer’s bank still” pays the so called “interchange fee” “to the network and the ATM owner, but rather than passing” these monies on to consumers, banks are pocketing these funds.
A service that was once given away for free to save the banks money is now a “cash cow” as fees have exploded. The ATM fees and other charges are so outrageous that it’s no wonder big banks are no longer considered trustworthy. Because of this and the volatile state of the economy some folks have even returned to putting their money under the mattress.