A Study On Banks' ATM Network Service Fees In China

As the pace of global financial integration hastens, foreign banks are continuously pouring into the Chinese financial sector. Chinese domestic banks are facing increasing pressure and competition. How to achieve a competitive advantage over foreign banks on service charges is a key determinant of domestic Chinese banks'profit-making sustainability. According to industry reports, service charge categories have expanded from 300 in 2003 to the current 3000, outlined in Measures for the Management of the Service Prices of Commercial Banks.This essay discusses and examines service charges of well established ATM networks overseas. Furthermore, it has placed strong emphasis on the following topic areas:the correlation between ATM service charge level and the size of the ATM network; factors which influence the determination of surcharges as well as the inter-bank withdraws fee; Currently, Chinese domestic banks do not charge customers for surcharges; this fee only occurs in overseas'foreign banks with a mature ATM network. This essay looks particularly at how surcharges impact on customers' shopping behavior, whether this will lead to a switch of ATM networks or an increase of customer loyalty to the bank. Additionally, the essay examines the contribution that surcharges make towards a bank's profitability measures and in turn, how it affects the expansion of the number of ATMs within an existing network. Surcharges no doubt incur additional cost to a customer when accessing their own money. This essay also looks at how a bank justifies such expense to a customer in terms of both time and cost efficiency. How surcharges impact on social welfare is analyzed in this essay as well.Last but not least, this essay studies the factors (such as the size of bank branch networks and the type of services provided by the bank) that may influence how much a bank charges for ATM services. At the same time, the essay has outlined the benefits of having an ATM network. Based on insights, this essay makes some strategic recommendations as to how a bank determines how much it should charge for ATM services.This essay introduces the surcharges included in foreign mature ATM network service fees into the charging mechanism in China, and outlines its contributions to the banks'profits, it is also the first time to analyze the influences of surcharge on customers'welfare. Even though the theoretical analysis applies that the surcharge has increased the inter-banks cash withdraws fee for customers, it encourages commercial banks to supply network equipments, as well as to improve the overall size and quality for the ATM network, so that both transportation cost and time cost can be reduced for customers when accessing the ATM network services. As the surcharge is offset by the cost reductions, thus the surcharged collected will benefit customers' welfare.