ATM fee sensitivity rises with competition and repeat use
Consumers respond more strongly to ATM surcharges when alternatives are nearby and withdrawals are planned, Federal Reserve research finds. Krzysztof Wozniak also finds that higher fees reduce withdrawal frequency but increase cash withdrawn per visit.
More alternatives, fewer paid withdrawals
Krzysztof Wozniak uses millions of daily observations from thousands of U.S. ATMs between November 2014 and June 2017.
The terminal-fixed-effects model estimates withdrawal-frequency elasticity at -0.311 and average-withdrawal-amount elasticity at 0.027: higher fees mean fewer withdrawals but larger amounts per visit.
Competition strengthens the frequency response.
Estimated elasticity is -0.22 at the 10th percentile of local ATM availability and -0.41 at the 90th percentile.
Responses also differ by venue: medical centers, offices and universities show greater sensitivity than tourist attractions and exhibition centers, where estimates are not statistically different from zero.
Familiarity changes the fee response
Wozniak interprets venue differences as consistent with planning and learning through repeated use.
More educated communities exhibit greater fee sensitivity; higher-income areas, recent arrivals and areas with more non-English-primary-language residents exhibit less.
The models combine terminal and time fixed effects with U.S. Census demographics and ATM-location data.
Around a quarter of ATMs changed surcharges; 98 percent of those changed them only once, supporting the paper's identification strategy.
Unequal responses, incomplete welfare evidence
The paper links unequal fee responses to competition, information barriers and opportunities to learn.
It cannot track individual customers or directly observe their bank relationships and cash holdings.
Wozniak identifies individual-level data and supply-side costs as avenues for welfare research.