Previous thread on (the semantics of) ‘fair usage’.
Offering services such as fee-free ATM withdrawals are always a balancing act.
On the one hand, ATM withdrawals are (rightfully so) an expected feature of a retail banking product.
On the other hand, ATM withdrawals as a functionality incurs fees for the bank involved. Especially if it is made outside the UK/Eurozone.
‘Fair usage’ as a terminology is debatable.
Like any business decision, a balancing act.
Given how capital intensive ATM transactions are (as an aggregate, on the international level.), it should not be where capital is used (VC money, crowdfunding money, company revenue.).
You mentioned Monzo in both the title of your post, and the body content of the original post.
You have however, failed to mention that the days of unlimited fee-free withdrawals may be over.
A discussion on their respective forums has been brewing. Some excerpts below, and my thoughts on it.
The annual report publicly released by Monzo identified ATM withdrawals (in particular, withdrawals outside the UK/Eurozone.) being a significant source of costs.
In addition, a small slice of the user base is the origin of this cost base.
The CEO introducing the idea that there will be a quota in the future.
A shift towards mirroring Revolut’s policy of having a ‘fair usage’ monthly quota on fee-free ATM withdrawals.
Users looking to leave if a ‘fair use’ policy implemented.
Disproportionate amount of cost borne by the entirety of the user base (Via greater spending on ATM fees, therefore less capital directed towards other productive purposes, such as engineering/R&D, marketing and international expansion.), due to usage that deviates from the average volume of ATM withdrawals.
Very good point.
Even with paid ATM withdrawals (Beyond the £200 standard/£400 Premium quota for fee-free ATM withdrawal.), it is cheaper than withdrawing or transacting via a legacy bank, and safer than bringing cash in a bundle to the country that you are visiting.
Similarly, Revolut’s original product was that it is a dual feature currency solution. Firstly, as a currency account, with interbank rate for currency exchange. Secondly, as a debit card that can be used to spend money overseas, at the interbank rate for currency exchange.
Whilst ATM withdrawal is a supported feature (As acknowledged by the provision of fee-free ATM withdrawal, with a quota.), it is not the primary purpose of Revolut, nor where the value proposition stems from.
As seen, the fees stemming from fee-free ATM withdrawal not just a problem for Revolut, but for the entire retail banking industry.
Some subisidise it, as previously mentioned, by recouping the cost elsewhere via more expensive financial products with higher interest rates or more uncompetitive FX rates. Others use VC money/revenue to subsidise this. For the latter, the arrangements can last only so long before the the majority of capital is dedicated towards servicing fees incurred via ATM withdrawals.
Looks like your proposal of £500 wouldn’t be good enough.
Given how ATM withdrawal an auxiliary function of ‘neobanks’, due to the rise of the ‘cashless society’, legacy functions such as ATM withdrawal are not the main selling point of ‘neobanks’.
User feedback seem to indicate that £200/month fee-free withdrawal is a ‘fair’ amount, with a subsequent (non-profitmaking) percentage fee applied after.
In summary:
-Given how ATM withdrawals are capital intensive due to fees (especially outside the UK/Eurozone.), a fair limit should be imposed for fee-free ATM withdrawals.
-Fee-free ATM withdrawals deemed (rightly so) a core part of a retail banking product.
-At the same time, this should be balanced with cost controls.
-Further withdrawals (Revolut’s is £500/day.) should be charged as a percentage fee.