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Prepared by:
Vishal Jaiswal

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Introduction

Automated teller machines can offer significant benefits to both banks and their depositors. The machines can enable depositors to withdraw cash at more convenient times and places than during banking hours at branches. At the same time, by automating services that were previously completed manually, ATMs can reduce the costs of servicing some depositor demands. These potential benefits are multiplied when banks share their ATMs, allowing depositors of other banks to access their accounts through a bank’s ATM. The decision by banks to share their ATMs is partially determined by the terms under which the sharing would occur. In particular, there are several prices that can be charged to or collected by the three main parties involved in an ATM transaction, the cardholder, the cardholder’s bank, and the ATM owner. How, and by whom, these prices are set affects a number of economic decisions, including the number of machines that banks and non-banks choose to deploy, deposit market interest rates, distances traveled by depositors and non-depositors that wish to withdraw cash, profits of banks, and welfare of bank customers.