Conference 7.286::dcu

I'm not privy to the per-transaction cost of doing business,
but I will share this anecdote.  Perhaps you will draw the
same conclusions I have.

I recently talked to one of the VPs at DCU.
During our conversation, I mentioned that I do probably
90-95% of my business at ATM machines.  His response was
to indicate strongly that this was the type of customer
the credit union wanted due to the cost of doing business.

I'm not sure I'm happy with the attitude, but it seemed
clear to me from our discussion that DCU wants people
who don't need a lot of attention.  Kinda runs counter
to the notion of a credit, in my opinion.

My feeling is, if you have a choice, use the one that
best suits your needs and with which you are most comfortable.
I use ATMs all the time because all I'm doing is transferring
money around or withdrawing pocket money. 

./chris

The short answer is that the cost per transaction for the ATM is far less
than the cost per transaction of a teller. I think this is a very good
question and it deserves a full answer. Let me try to work up a complete
answer with input from DCU and the rest of the board and post it later.
It may take awhile so please be patient.

    Is the cost difference due to a volume difference between ATMs and
    tellers?

No, the cost difference is because of the cost of the tellers is just
higher than the cost of a machine, especially if the
ATMs were used the amounts that the bank ATM machines are used.

    I'm confused, Paul.  You say that the numbers aren't volume dependent,
    yet you say "especially if the ATMs were used the amounts that the bank
    ATM machines are used".

No, not that the numbers aren't volume dependent because they obviously are.
I'm saying that with any reasonable numbers, a person is going to cost
more than a machine. And as the volume of ATM transactions goes up as we
hope they do, the per-transaction difference will become greater.

For instance, suppose an ATM had only 1 transaction per month. Then that ATM
transaction would probably cost more than a transaction with a live
teller doing the volumes that tellers normally do. But that ATM would not
stay in that environment either. It'd be yanked because it'd be too costly.

If a DCU ATM transaction is significantly cheaper than a teller transaction
(by say more than $1.00) then surely the $1 network ATM transaction would
still be cheaper than a teller transaction, and therefore consideration for
free or reduced cost network transactions should be considered ...

Say, free (or even some lower nominal fee) in towns that do not have DCU ATMs, 
but $1 in towns that do ?

This would satisfy those who do not have access to a DCU ATM locally and
would not create "special" membership categories, because it would apply
to all members the same.

Stuart

    Stuart brings up an interesting point.  Were the cost figures presented
    for DCU ATMs or for ATMs in general?

For DCU ATMs... Rather than speculating without data, let us put together
a full answer to the question. Again, it'll take awhile, so please be
patient.

    That's what I thought since I understood the $1 transaction fee was a
    fee charged by the foreign ATM network.

Obviously we have to look at TOTAL costs in providing a withdrawal
transaction ...

For a teller

	S + O * (% time processing withdrawals in a day) / N

	where S + O is salary + overheads
              % of time processing withdrawals   (lets make sure we are
			comparing apples and apples here)
	      N is the number of transactions

For a DCU ATM it gets more complex ...

	Machine cost / transaction + Network cost / transaction +
	Maintenance costs /transaction

	Machine cost is made up of
		. capital cost depreciated over the total estimated life of
                    the ATM and modems and computer required to drive
		    the DCU ATM network (in transactions)
		. physical maintenance of the ATM
		. space rental if applicable

	Network cost is made up of
		. actual network connection costs ... such as phone line
	  	  charges or similar

	Maintenance costs are made up of
		. salary and overheads for the person loading the machine with
		  money and paper and the people ordering paper, bundling
		  money etc etc
		. paper, ribbons etc

	These costs must be weighted to accurately reflect the per withdrawal
	cost.

For a Network ATM, the cost formula is simpler ...

	Network Membersip / transaction + Use fee per transaction

Depending on what Network Membership costs, this could be actually cheaper
than both tellers and ATMs!

Stuart