ATM Surcharge Bans and Bank Market Structure: The Case of Iowa and its Neighbors

Abstract

It is frequently claimed that high ATM surcharges actually attract customers to the banks that impose them, particularly if they operate large ATM networks. By exploiting as natural experiments two events associated with the lifting of surcharge bans in Iowa and in the states that neighbor Iowa, this paper seeks to test for the implications of this phenomenon as it applies to the market shares of banking institutions and to several aspects of market structure. Consistent with these implications, results of difference-in-difference analyses suggest that the shares of larger market participants increase, the shares of smaller market participants decrease, market concentration increases, and the number of market competitors decreases after the lifting of surcharge bans.

Keywords: ATMs surcharge competition

JEL Classification: H2, I3