Page 471 - Business Principles and Management

Unit 5

grocery stores, airports, and malls. ATMs are now com-
mon throughout the world and can be used to obtain
foreign currency quickly and easily.
In addition to attracting more customers with ATMs,
banks lower their operating costs by reducing the need
for human tellers and increase income from service fees
each time a customer withdraws cash. Furthermore,
banks with ATMs need fewer branch offices to serve
their customers.
Financial institutions try to reduce ATM-related
crime by locating ATMs in well-lighted areas. Most
have hidden cameras that may help police identify
thieves. Along with crime, ATM customers are con-
PHOTO: © GETTY IMAGES/PHOTODISC. additional fee when withdrawing funds from another
cerned about high withdrawal fees and having to pay an
bank’s ATM. For example, if your bank’s ATM fee to
withdraw $50 is $1.50, and you withdraw the money
from a competitor’s ATM that charges $2.50, you
would pay $4 to obtain $50. Many customers object to
paying both banks a high fee. But with so much banking
competition, ATM fees are another means for banks to
pay some of the costs of providing customer services.

Why have automatic teller ELECTRONIC BANKING
machines become so popular
Electronic banking speeds business activities and serves customers more conve-
with consumers?
niently. Through computers, modems, and the Internet, banking without leaving
the office or home has become common. Electronic banking makes it possible
to obtain loans, pay bills, and transfer funds from one bank account to another.
Of course, most banks charge fees for these services.
The Internet is a new way for banks and nonbanks to survive. Many have
Web sites publicizing their services. Customers can search the Internet for the
best interest rates for loans, best savings account rates, and best checking ac-
count terms. Loan and credit card applications can be processed and approved
quickly online. Internet banks have several advantages over traditional banks.
Not only can they perform most of the same services traditional banks offer, but
they can also do it at lower cost. An Internet bank does not need large, expen-
sive downtown buildings with numerous branches from which to conduct busi-
ness. It can operate from a single, low-rent building 24 hours a day, seven days
a week, to reach worldwide customers. Banking operations centers may actually
be located in other countries. For many customers, online banking can satisfy
most day-to-day banking needs. Breaking old banking habits, however, may not
be easy to do for many people.
One study found that a single banking transaction costs a traditional bank
$1.07, whereas an Internet bank’s cost is 2 cents for the same transaction. That cost
difference is one reason many large banks are quickly adding Internet-banking
departments.

CHECKPOINT
How does the use of technology reduce the costs of providing
financial services?

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