The cost of banking for households and businesses is falling, according to two annual studies by the
Reserve Bank of Australia and the
Australian Bankers Association.
In 2012, banks collected A$11.3 billion in service fees from businesses and households, a rise of four per cent from 2011. However, measured as a percentage of loans and savings, costs were lower in 2012 than in recent years.
Overall, the industry's revenue flow from fees is growing very slowly - rising only one per cent on average over the three years to 2012.
Banks are generating a rising income stream from business customers but collecting less from households.
The ABA said "increased bank volumes (from households and businesses) were the main driver of bank fee revenue, not higher fees."
The industry association pointed out that there had been a "strong downward trend in the ratio of bank service fee revenue to banks' resident assets since 2001."
It said that bank service fee revenue as a proportion of domestic assets in 2012 stood at a record low of 0.44 per cent. In 2001 and 2002, this ratio was twice as high, at 0.85 per cent.
The RBA said fee income from businesses increased by seven per cent in 2012.
It said much of this growth was due to fee income from business loans, while the ABA pointed out that large businesses accounted for more of the increase than small businesses.
The RBA said this rise was, in turn, largely the result of an increase in the account servicing fees charged to businesses and "reflects modest growth in the number and value of new loans as well as an increase in the fees themselves."
Another driver of growth in business fee income was the increase in fees earned from providing merchant services for processing credit and debit card transactions.
In contrast, banks' fee income from households fell in 2012, for the fourth year in a row.
The RBA said that credit card fee income grew slightly in 2012. Income from fees on deposits fell, partly because of a shift in savings to term deposits, which often have no fees.
The fall in deposit fee income in 2012 was mostly driven by a decrease in account servicing and transaction fees on transaction deposit accounts, the RBA said, even as deposits increased strongly across the industry.
Fee income on housing and personal loans remained at around 2011 levels, the RBA said.
The RBA estimated the ratio of deposit fee income to deposits in the household sector at 0.2 per cent in 2012, one third the ratio in 2008.
In the mortgage segment, the RBA noted a "slight decline in housing loan fee income, despite the 5 per cent increase in mortgage lending over the year."
"This divergence partly… resulted from a continued fall in exit fee income following the Federal Government's ban on exit fees on variable rate home loans in July 2011."
The RBA observed that "there had been speculation that lenders would increase other fees to compensate for the potential loss of income."
"However, average fees (excluding exit fees) charged on variable rate mortgages discharged after three years have declined slightly, for both bank and non-bank lenders, since the ban was implemented."
One quirk in the 2012 survey data is that there was a slight increase in income from exception fees on deposit accounts.
This form of fee has been controversial, with banks axing or reducing many fees in response to customer unease over the level of fees. A class action to recover excess fees (initially, from ANZ) is before the courts.
The RBA said the increase in deposit exception fees, reported by a small number of banks, was accounted for by an increase in the number of times fees were charged, rather than the level of fees.
The RBA said this growth was "likely to have been due to the increase in the number of deposit accounts during the year."