An even more fundamental question is; Do Bitcoin ATMs charge a fee?
Whether ATMs charge a fee and, if yes, how much, are questions that are most likely to pop up in your mind if you are seriously considering buying or selling bitcoins through a crypto ATM for the first time.
And if you are considering investing in a Bitcoin ATM, then you might be having a similar question on the other side of the transaction; how much money do Bitcoin ATMs make?
It turns out the answers to these questions are not simple, and cannot be provided in single lines or paragraphs.
And that is because of the following reasons:
- A lot of diversity exists in Bitcoin ATMs manufacturers and operators.
- The goals and motivation of Bitcoin ATM companies and operators are not the same
- The Bitcoin ATMs are run under different business models.
Let’s go through each one of these points in detail.
How many bitcoin ATM brands are there?
It is still early days for Bitcoin ATMs, and, therefore, there are not so many of them out there. In fact, according to BitcoinATMRadar.com, a site that provides locations for Bitcoin ATMs near you, there are about 5000 active ones in cities and towns around the globe. The monthly growth rate of the number of Bitcoin ATMs is between 2% and 5%.
However, considering this number, the list of brands is relatively long. There are at least ten Bitcoin ATM manufacturers and brands, almost all which also run and manage Bitcoin ATM networks. How each manufacturer designs, builds, distributes and manages its machines has a significant impact on how the end user is charged. Or whether they are even charged at all.
The end goals of the Bitcoin ATM service providers
Overall, Bitcoin ATM operators are seeking to make a profit. In particular, they need revenue to take care of the initial cost of manufacturing and installation, running expenses and, of course, return on investment.
But some are made available to the public by entities and individuals who want to do it for the greater good of spreading cryptocurrencies to the masses.
Satoshiware NQ is one such Bitcoin ATM network. The company operating in North Queensland, Australia, claims to manufacture, install and manage Bitcoin Cash ATMs free of charge for the end user. It instead of charging a fee, the company chooses to ask for donations from those who want to support and help spread the use of Bitcoin Cash.
It is important to point out however that a Bitcoin ATM company or network claiming not to charge fees doesn’t mean there is no cost attached for the end user. In the business of buying and selling bitcoins, the declared fee charged is not the primary source of revenue. A more effective way of passing the cost to the consumer exists. I explain this in the following sections of this post.
The different business models of Bitcoin ATM networks
Traditional ATMs are automatically owned and operated by a financial institution, usually a commercial bank. Bitcoin ATMs are also managed by corporate entities. In many cases, the manufacturers are also the ones running the Bitcoin ATM networks.
More important though, the machines are often sold to individuals and small business owners to install in their premises such as bars, restaurants and shopping stores. The small business owners get to decide how much they charge the people who use the machines.
It is always a possibility that some of the business owners decide to provide these machines as a value addition to the other products and services they offer at their premises. It also turns out some of the manufacturers would offer to manage the machines for the business owner at a fee.
In short, Bitcoin ATMs are managed and run under different business models, some customized for the unique needs of an individual owner. And all that has a huge influence on whether users pay fees and how much.
So, do Bitcoin ATMs charge a fee?
Except for very few cases, Bitcoin ATMs do charge fees. And this is necessary, in particular, because those who run them need revenue to cover the initial cost of manufacturing and installation. They also need to cover operation costs as well as a profit margin.
And how much does a Bitcoin ATM charge?
Many Bitcoin ATM operators are not willing to share with the public the fees they charge. In late 2014, CoinATMRadar announced that it had added functionality on the website that would make information about fees accessible before you reach the ATM.
However, this has not been very successful in providing data from all machines on the map. This is because the feature relies on the Bitcoin ATM manufacturers and operators to let their machines share the information with the CoinATMRadar website. Not many ATM operators are willing to make the information available.
CoinATMRadar has a few times published Bitcoin ATM fees analysis of the data collected from machines that stream it to their website. The first report was published in September 2014 and was generated from data gathered from 127 ATMs.
The highlights of that report included the fact that the average fee was 6%, and an accompanying graph showed that percentage was gradually increasing over time.
The report also showed that fees charged were different for different regions. Bitcoin ATMs in Oceania charged the highest (at around 8%). North America came second at about 6%, and Asia was third at slightly below 6%.
In 2016, CoinATMRadar released a second version of the report. One of the significant changes was an increase in the number of machines from which data was collected (close to 1000). The average fees charged by Bitcoin ATMs also rose to 7.5%, with buying fees standing at 8.36% and the selling fee at 5.37%.
No further reports have been released since.
The lack of fee information makes it hard to determine how much you are likely to pay.
With that said, what you pay depends on several factors, and that means each Bitcoin ATM often ends up having its own rates.
The following factors influence how much fees you end up paying to a Bitcoin ATM:
Who owns and operates the machine.
The owner of the machine has the discretion of deciding how much to charge. And the fee they charge is often informed by their business model. In particular, whether the machine is the leading business or it is just part of a bigger enterprise, and it is only there to help customers convert between currencies as they buy other goods and services.
It is also informed by whether it is a Bitcoin ATM company that manages the machine. If it is, then rental costs come into play. That means a machine located in a high-cost location might not charge the same to one in a low-cost section of town or city.
But of course, other factors such as transaction volume might cancel out this factor. With higher volumes, for example, a machine can charge low but collect more. On the other hand, a small volume might force the Bitcoin ATM owner to charge more to attain revenue targets.
In some instances, the Bitcoin manufacturers offer to manage the machine on behalf of the owner at a cost. For example, General Bytes charges 0.5% of the cash inserted into the machine when it manages it on behalf of the owner. That has to be included in what the user pays.
Whether you are selling or buying
These two types of transactions are often charged differently. For example, on Localcoin ATMs, a network with a considerable presence in Canadian cities and towns, you are charged a commission of up to 8% when you buy between $20 and $9000. Selling bitcoins amounts in the same ranges attract a fee of 5%.
One particular reason why you may pay more to buy bitcoins than to sale has to do with transaction fees paid to the Bitcoin network for miners. As a buyer, the Bitcoin ATM wallet would have to fund the confirmation of the transaction on the Bitcoin shared ledger. And as a business establishment, the Bitcoin ATM transfers that cost to you as the customer.
As a seller, you are the one to take care of the transaction fees on the Bitcoin network. That means the Bitcoin ATM charges you less when you sell to it, but on overall you pay as much in fees as when are buying.
The amount you are transacting
The influence of the amount of fees you pay to use a Bitcoin ATM comes in two ways.
The first is the direct classification of amounts a user can transact. For example, a Bitcoin ATM might charge a 5% commission on amounts between $20 and 500% but 2.5% on amounts over $500.
The second is just direct graduation of the actual fees when a fixed percentage commission is applied. For example, if a Bitcoin ATM charges fees at a fixed percentage of 10%, you will pay $10 to transact $100 and $100 to transact $1000.
How fast you need the transaction to go
Yes, you may have to pay a premium fee if you need your transaction to complete more quickly. When selling, this is straightforward. The time it takes the Bitcoin network to confirm your transaction of bitcoins moving from your wallet to that of the Bitcoin ATM depends on the fees you attach for the network miners. The higher the fees, the faster it takes.
When buying Bitcoins, the Bitcoin ATM needs to attach a similar fee on the transaction. The higher the fee it attaches, the faster the bitcoins reach your wallet. The Bitcoin ATM often does not want to incur this cost but will do so if you accept to pay them back as part of the fees you pay them.
So if you need instant settlement of a transaction on a Bitcoin ATM, you may be asked to pay a premium rate.
The primary way ATM charge you and how to know how much
Some Bitcoin ATMs will indicate that they charge a percentage commission, others will claim not to charge anything at all and others might claim to charge a flat rate. But what you might not know is that the primary revenue for many of them is not the declared fees.
In essence, Bitcoin ATMs are trading exchanges. They help you convert between currencies, and like any other exchange, they have the option of giving you premium exchange rates.
The protocol on the machine is often set in a way that after collecting exchange rates from the oracles around the internet, they add a particular percentage margin. More importantly, they are set in a way that they add a margin on the exchange rate in favor of the machine.
If you want to know how much it is likely to cost you to use a Bitcoin ATM, make sure you find out what the prevailing exchange rates are on platforms like CoinMarketCap. You can then compare them with what the ATM is showing (or offer.)