Estimating Switching Costs in the Swedish Banking System: a study on the introduction of ATM fees

Sammanfattning: Several studies show that the Swedish banks’ costs for the services they provide are not always communicated through the prices charged. At present, ATM withdrawals in Sweden lack a correct pricing scheme. One of the commonly referred to explanations for this is the possibility of customers switching banks when being faced with ATM fees. This thesis investigates how consumers would react to the introduction of ATM fees in Sweden. By using a consumer survey in combination with logistical regressions, the authors estimate a model that calculates the probability of a consumer to switch banks at a given ATM fee. The median consumer in the data set has a 26.7% (53.9%) probability to switch banks at an ATM fee of SEK 4 (SEK 8). From the results of this study, the authors believe that an introduction of ATM fees in Sweden would lead to welfare gains through a more efficient use of the cash handling system.