Whenever I hear about a proposed policy such as this one, I try to construct an argument both for and against the proposed policy. I think it's important not to just consider one side of the argument - by considering both it's merits and flaws, you get a more accurate picture of how valuable the idea might be.
I thought this analysis would be completely one-sided, that is, I'd find little merit in the idea that the government should regulate ATM fees. I was surprised, however, to find myself compelled by the argument I could come up with in support of an idea which deep down I feel is absurd.
Argument Against Government Regulation
ATMs are far from a necessity. I remember ATMs being introduced into my hometown during my lifetime and I'm not yet 30. People operated perfectly fine without ATMs fine for hundreds of years and a great number of people still don't use them, for a variety of reasons.People are willing to pay other-bank ATM fees for the convenience they provide. Instead of walking or driving to the closest own-bank ATM, they decide to pay a higher fee in order to avoid the trip. Personally, I very rarely use other bank ATMs, as a consequence I tend to make fewer trips to ATMs but take more money out on a given transaction. Although I do not take out small amounts from other bank ATMs, I understand how people could feel it's worth the added expense.
The price of pop and chocolate bars at the corner store tends to be a fair bit higher than at the supermarket, but we're willing to pay them, in order to avoid travelling the extra distance. We wouldn't imagine (at least, I hope not) regulating the prices of corner stores, so why should we with ATMs?
Argument For Government Regulations
As I stated earlier, I did not believe I could come up with a compelling argument in favor of government regulations. I'm still not convinced by this one, but it's a lot stronger than I had anticipated. It's for the Canadian context, so I'm not sure how well it translates into other jurisdictions.In Caada, the banking market is already highly regulated by the federal government. Foreign banks are prevented from opening branches and offering many banking services, creating an artifical oligopoly on banking services. Due to the government regulation protecting them from foreign regulations, Canadian banks are far profitable than other similar sized companies in the economy.
Because the number of banks is kept artifically low, it's not hard to imagine that the number of ATMs may be kept artifically low and fees kept artifically high. Since the bulk of the banking regulations are in favour of the banks (and not the consumer), it shouldn't be asking too much to greatly reduce fees charged by banks. This may cause banks to reduce the number of ATMs they have, but there's no reason we can't regulate that banks keep a certain level of ATM usage.
Of course, these are second-best solutions to allowing a free market in banking. But since the banking industry is already so highly regulated, why not regulate it towards helping the consumer?
I'd love to hear your thoughts on this. You can contact me by using the feedback form.
