A GUIDE TO THE ATM AND DEBIT CARD INDUSTRY

     The ATM and debit card industry is undergoing dramatic change. From the sharp growth in point of sale debit card transactions to the heavy consolidation of the regional networks handling electronic transactions, the industry’s transformation raises economic and public policy issues.

     “A Guide to the ATM and Debit Card Industry,” a new research paper from the Federal Reserve Bank of Kansas City’s Payments System Research Department, provides a comprehensive overview of the industry and begins to address important issues such as market concentration, vertical integration and economies of scope, pricing, access and risk. The paper’s authors are Vice President and Economist Stuart E. Weiner, Economist Fumiko Hayashi and Banking Studies and Structure Economist Rick Sullivan.

     The authors note that it is likely market concentration to date has improved social welfare by allowing economies of scale and network externalities to be realized, although further consolidation could potentially limit innovation.  The authors also observe that changing pricing structures have been beneficial in some instances, but appear to have had mixed implications in others. Among other findings, the authors note that overall access to ATM and debit services has likely increased, but access for some has possibly become more costly.

     The authors point out that much additional research needs to be done in areas such as the potential antitrust implications and how the changing wholesale fee structure affects network access.

     A complete text of the paper, along with other papers from the Payments System Research Department, is available on the Bank’s Web site at www.kansascityfed.org or by contacting Tim Todd at 816-881-2308.

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