Surcharge-free ATM networks are expanding in Canada. The push is being led by Canadian credit unions as well as the efforts of U.S.-based Cardtronics.

The latest indication of this trend is Credit Union Central of Canada's new "ding free" smartphone app, which locates the nearest surcharge-free ATM, the association announced Jan. 9.

The application represents a strike by credit unions against banks, says Art Chamberlain, spokesman for Central 1, a credit union financial trade association in British Columbia and Ontario.

"The big part of this is making people aware of the substantial credit union network and the surcharge-free ATMs available," Chamberlain says. "It's a really slick application and makes it a lot easier to track those ATMs down."

Credit unions in Canada have been working on the application with Central 1's technology team for the past six months, Chamberlain adds.

Credit union members using the ding-free application will see at least 1,800 surcharge-free ATMs available to them, Chamberlain says. If those customers are members of both the Exchange and Acculink ATM networks, they would have access to a total of 2,400 ATMs without being charged a fee, he added.

Cardtronics' surcharge-free Allpoint ATM network is not directly involved with the ding-free credit union program, says Cardtronics spokesman Nick Pappathopoulos. However, Cardtronics stands to benefit from the credit union's efforts, he says.

"The concept of surcharge-free ATM networks has been around for 10 years, but this is a case where the rising tide raises all ships because it is good PR for the ATM industry, so that makes it good for Cardtronics," Pappathopoulos says.

Cardtronics expanded its Allpoint surcharge-free network of ATMs into Canada last year through deals with 7-Eleven convenience stores and Scotiabank.

In addition to being another "classic case of a shot across the bow in the credit unions vs. banks battle," the ding-free ATM program showcases how the industry is using new technology, he adds. "It's a new dawn for surcharge-free networks."

Because credit unions have embraced surcharge-free ATMs for years, community banks now find themselves at a "severe disadvantage," says industry analyst Russ Schoper of Atlanta, Ga.-based Business Development International Inc.

"Banks have not embraced surcharge-free ATMs, for whatever reason," Schoper says. "But I know from talking to bank officials that they are looking at other solutions."

One industry reality working against banks is that ATM providers serving credit unions tend to operate shared networks, Schoper says.

"The banks don't want to incur extra costs that a shared environment might bring to them," he says. "They want to reduce costs and gain revenue."

Larger banks in Canada are not likely to feel they have an issue with surcharge fees because as many as 85% of their ATM transactions are initiated by their own customers using the bank's network, thus no fees are charged, says David Albertazzi, a senior analyst and ATM expert with Boston-based Aite Group.

The same would hold true for banks in the U.S., where even the top 200 banks in the country have about 70% of their ATM transactions initiated by customers using their own bank network, Albertazzi says.

"Still, the surcharge fee represents a significant amount of revenue for the banks, and on average, it is higher in the U.S. at about $2.78 per transaction, compared to Canada," Albertazzi says.

However, banks are not "jumping on surcharge-free ATMs because they know their own customers generally will hunt down their bank's ATM network to avoid the fees," Albertazzi adds.

Most consumers don't consider ATM fees to be a major issue even when they have to pay them, says Sam M. Ditzion, CEO of Boston-based ATM industry consulting firm Tremont Capital Group Inc. 

"Consumers have been 'voting with their feet' for years, and many have continuously decided to pay a small convenience fee for access to the most convenient locations," Ditzion says. "While a small number of consumers may be resourceful and patient enough to use a smartphone to find surcharge-free ATM or save one cent per gallon on gas, most consumers tend to ultimately vote for the easiest and most convenient option."

The Canadian credit unions' ding-free application operates on Apple Inc. iPhones, Google Inc. Android devices, Microsoft Windows and Research in Motion Blackberry devices.

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