ATM interchange fees are charges paid between card-issuing banks and ATM operators to cover the costs associated with transactions at ATMs. Specifically, when a cardholder from one bank uses an ATM owned by another bank or an independent operator, the card-issuing bank pays a fee to the acquiring bank or ATM operator to compensate for operational expenses such as network access, cashMoney in physical form such as banknotes and coins. More handling, security, and technology maintenance.
The card networks—primarily Visa and Mastercard—play a central role in setting these interchange feeA fee paid between banks for the acceptance of card-based transactions. For instance, a merchant’s bank (acquiring bank) will pay an interchange fee to the cardholder’s bank (issuing bank) when the latter makes a transaction. This is also the case when a cardholder uses an ATM: the cardholder’s bank pays a fee to the ATM operator. More structures. They establish the rules and fee schedules that govern transactions across their networks, ensuring interoperability.
Interchange fees differ from surcharges, which are fees charged directly to consumers for using an ATM. Surcharges are set by ATM operators and can vary, whereas ATM interchange fees are set by card networks and paid between banks. This distinction is critical because it affects how ATM operators generate revenue and manage costs.
The historical evolution of interchange fees is marked by increasing complexity and regulatory scrutiny. Initially, fees were relatively simple and aimed at cost recovery. Over time, they became a significant revenue source for banks and card networks, leading to higher fees and more opaque structures.
Visa and Mastercard historically set interchange fees twice annually, adjusting rates based on transaction types, card types, and regional markets. However, these fees have remained largely unchanged for years, failing to keep pace with rising ATM operational costs, including inflation, cash logisticsThe term originates from military language and refers to the movement and provisioning of troops at war. In today’s business vocabulary, it refers to the management in particular, the transportation, storage and distribution of finished goods. More, and compliance expenses.
Visa and Mastercard policies on interchange fees have profound implications for ATM operators, especially independent deployers (IADs) who rely on interchange revenue to sustain their operations.
Additionally, Visa and Mastercard have imposed non-discrimination clauses that prevent ATM operators from charging different fees based on the card network or issuing bank. These clauses were central to recent U.S. class-action lawsuits alleging that the companies conspired to keep ATM access fees artificially high by restricting competition.
The $167.5 million settlementThe discharge of an obligation in accordance with the terms of the underlying contract. In e-transfers the settlement may take days, whereas cash settlements are instantaneous and irreversible. More between Visa, Mastercard, and ATM users underscores the legal and regulatory scrutiny the companies face. The lawsuit alleges that Visa and Mastercard’s rules blocked independent ATM operators from offering lower prices, maintaining high fees that were passed on to consumers. While Visa and Mastercard denied wrongdoing, the settlement reflects growing pressure to reform ATM interchange fee practices.
Visa would contribute about $88.8 million and Mastercard about $78.7 million to a settlement fund. The lawsuit, one of three related cases in the D.C. federal court, was filed in 2011. The two companies last year agreed to pay $197.5 million to resolve related claims from a different group of ATM users who claimed they were overcharged at bank-operated ATMs. Several banks in 2021 agreed to pay $66 million to settle claims against them in the litigation.A third lawsuit by independent ATM owners and operators is pending in the same court.
Independent ATM deployers (IADs) face a widening gap between stagnant interchange fees and rising operational costs. While interchange fees have remained largely unchanged for years, ATM operational expenses—including cash handling, security, compliance, and technology upgrades—have increased significantly due to inflation and regulatory requirements.
This mismatch threatens the sustainability of ATM networks, particularly in low-transaction or rural areas where revenue per ATM is lower. Many operators report that interchange fees no longer cover their costs, forcing them to either absorb losses or increase surcharges, which can reduce ATM usage and further erode revenue.
Visa and Mastercard’s rules historically restricted ATM operators from adjusting surcharges to offset low interchange revenue. The “honor-all-cards” rule and non-discrimination clauses prevent operators from charging different fees based on card type or network, limiting their ability to respond to market conditions and cost pressures.
This lack of flexibility forces operators to either accept losses or pass costs onto consumers via higher surcharges, which can reduce ATM usage and create a vicious cycle of declining transaction volumes and revenue.
The dominance of Visa and Mastercard in card payments reduces negotiation power for ATM operators, leaving them with little leverage to secure fairer fee structures. The concentration of market power allows the card networks to set interchange fees unilaterally, without meaningful input from ATM deployers.
This market structure limits competition and innovation in ATM pricing models, further squeezing independent operators who lack the scale and bargaining power of large banks .
The decline in ATM availability disproportionately affects vulnerable groups—low-income consumers, the unbanked, small businesses, and rural communities—who rely heavily on cash for daily transactions. Reduced access to cash can lead to financial exclusion, increased financial instability, and a higher risk of poverty.
The current interchange fee model, by threatening the viability of ATM operators, risks creating “ATM deserts” in underserved and rural areas. This would exacerbate financial exclusion and undermine efforts to promote financial inclusion.
The current ATM interchange fee model, shaped by Visa and Mastercard’s policies requires structural reform to ensure the long-term viability of ATMs. The stagnant interchange fees, coupled with rising operational costs and limited pricing flexibility, create a financial strain that threatens the sustainability of ATM networks, especially for independent deployers.
CashEssentials is finalizing a policy paperSee Banknote paper. More proposing specific fixes to ATM interchange fees, The paper will call for collaboration among regulators, card networks, and ATM operators to develop a sustainable model that ensures ATMs can continue to provide essential access to cash.