The embarrassing irrelevancies of the ATM-charge debate

I’m sure Dan Eggen wrote this story about the failure of the Senate to address ATM charge rates as an example of how out of touch old legislators get while in Washington.  However, it reads more like how out of touch the Washington Post and the Senate have gotten about the advance of retail and banking technology, and Eggen himself provides the clues:

Sen. Tom Harkin (D-Iowa) has long pushed an amendment to limit those pesky and expensive transaction fees at automated teller machines, but his fellow senators didn’t go along with the idea this week.

One possible explanation: Quite a few of Harkin’s aging colleagues appear to have little or no contact with the decades-old technology of cash machines.

Sen. Ben Nelson (D), for example, told the Omaha World-Herald this week that he has never once used an ATM, relying on bank tellers instead. His Nebraska colleague, Sen. Mike Johanns (R), has used his ATM card fewer than five times. And Sen. Charles E. Grassley (Iowa), the ranking Republican on the Finance Committee, told the newspaper that he has a bank card but doesn’t use it for cash.

“I’ve never used an ATM, so I don’t know what the fees are. It’s true, I don’t know how to use one,” Nelson, 69, said.

But Nelson added: “I could learn how to do it. . . . I swipe to get my own gas, buy groceries. I know about the holograms.” Nelson’s office did not respond to a request for comment Thursday.

“Aging” has nothing to do with it.  ATMs came into use almost 40 years ago — in fact, Dandy Don Meredith had a connection to one of the first machines offered to banks while doing Monday Night Football — when Nelson was a young man in his early 30s.  The machines went into wide use early in the 1980s, and networking fees became an issue shortly thereafter.  When the nation operated on a cash economy in the retail sphere, such fees were controversial, but because ATM use is entirely voluntary, Congress largely avoided restrictions on service fees.

Eggen scoffs at Nelson’s response, but it demonstrates exactly why this issue is largely irrelevant.  Several years ago, banks began issuing debit cards through their credit services, allowing people to spend exact amounts from checking and savings accounts rather than constantly accessing cash or writing checks.  Businesses responded by installing card machines in a much wider variety of retail outlets than before, such as fast-food restaurants, where credit cards had traditionally been refused.

As a result, cash has become an optional transaction medium in just about every retail context.  Either the transactions get processed as a credit charge, or people use their PIN to conduct a point-of-sale ATM transaction at the precise price.  In many instances, the latter process allows for free cash back from the retailer.

So, these days, a true ATM transaction becomes even more voluntary than ever before, and much less necessary than in the past.  Most ATM cards these days are actually debit cards processed through Visa or MasterCard anyway.  Even if that was not the case, though, the ATM is provided as a convenient alternative to appearing at one’s own bank in person to withdraw cash, a convenience for which banks should be allowed to set their own prices.  And note that this transformation didn’t occur because of government intervention, but through the normal process of market demand creating innovation.

Far from being an anachronism, Nelson’s response shows why Harkin’s bid to impose government control of ATM fees is about as relevant as a dial-up BBS service is to the Internet.  Perhaps the Washington Post might have thought of that before attributing it to Nelson’s age.