Yesterday at an ATM of Union Bank of India, I saw a poster (see below) that was revealing and self-explanatory in the context of charging for ATM usage beyond the ‘free’ transactions. The poster had clearly differentiated between Financial and non- Financial transactions.
Background: For many years, Banks have been campaigning to get their customers away from the branches to reduce the cost of transactions. They started with the ATM culture where a customer can withdraw cash only from the ATMs of that particular bank and then as adoption increased they made it possible for customers of any Visa card to withdraw from any bank that supported the network. And just like the mobile revolution, customers started using ATMS and more or less stopped going to the counters to withdraw cash except in situations where the withdrawal amount was more than the limit for withdrawal by ATMs.
And now when ATMs have become a habit, they have chosen to limit the transactions and charge for anything more than the limit. So what was created as a service to help customers enjoy convenience has now become a ‘Revenue Model’.
When I first came to know about this ‘free and then fee’ model, I thought it was fair on the grounds that if a customer can do 5 Free Transactions on the Banks’s own ATMs and 3 more in other ATMs in a month, he/she can actually transact 8 times using an ATM in a month. It seemed inconceivable to me that anyone would require more than this until I started reading the small print.
It was not just withdrawals but anything that you do in an ATM. See the above image once again and you will notice that Free Transactions would include Financial and Non-Financial and they have clearly listed out what would constitute a transaction. (I am happy that they have not included (as yet) “asking for a receipt for the transaction” as another Transaction)
I see that different banks offer different limits for the ‘Free’ but I am going to consider them as a single entity for the 5 questions (on the lines of daily 5 questions that BJP is posing to the AAP) that follow.
1. So do the banks want more people to come to the branches now and use the ATMs sparingly? This defeats the original purpose of offering this service because the cost of say ‘cash withdrawal’ at the branch was significantly higher than at the ATM.
2. Will there be a warning to the customers at the ATM or via sms when they exhaust the number of Free Transactions for the month and that they will be charged for further transactions during the month? I suppose Banks don’t expect their customers to keep track of their transactions on the own Bank ATMs and the network ATMs.
3. If the bank’s intention is that customers should pay for the services they enjoy, will it also extend to the number of debit card transactions and going forward Internet Banking? There is a high push from Banks to encourage the customers to use the debit cards instead of cash and I suspect that they will charge for debit card usage once it takes off. Likewise for the other services like sms banking, internet banking, app banking to just name a few.
4. Will banks allow carry forward of unused transactions for a period of 6 months? As a customer, I can plan my usage on a larger time window than just a month. If the Banks have the wherewithal to track the number of financial and non-financial transactions, surely they can offer this facility.
5. Is this a ploy to create new products like a premium account where the number of transactions on ATMs (or any other channels) will be unlimited to attract more customers?
Bonus question: Are the charges levied for the extra transactions inclusive of Service tax? I know that this is trivial but since there is no * in the poster above, I want a clarification.
I’m surprised and shocked that RBI has allowed Banks to get away with such customer-unfriendly practices.
Mr Raghuram Rajan, are you listening?