FIN-03-020

Is There a Customer Relationship Effect from Bank ATM Surcharges?

July 2003

Nadia Massoud, Anthony Saunders and Barry Scholnick

ABSTRACT
This paper investigates the use of ATM surcharges as a sategic device to increase bank profitability. We show that ATM surcharge changes can have both a direct effect on bank profitability and an indirect effect via customer switching and a related customer relationship effect. That is, customer switching results in an increase in the demand for other services provided by the surcharge increasing bank. Using unique data bases, we provide evidence to show that overall bank profitability is favorably affected by surcharge increases. We also show evidence supporting the existence of an indirect effect, especially for larger banks.

Nadia Massoud
Institution: School of Business, University Of Alberta

Anthony Saunders
Institution: Stern School of Business, New York University
Telephone: (212) 998-0711
Email: asaunder@stern.nyu.edu
Homepage: http://www.stern.nyu.edu/~asaunder/

Barry Scholnick
Institution: School of Business, University Of Alberta

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