Bank fees paid by households declined in the 2021/22 financial year but an increase in fees paid by business and government customers meant that total bank fee income rose for the first time in six years.
According to the latest Reserve Bank report on bank fees in Australia, total bank fee income of A$14.5 billion in 2021/22 was up 30 basis points, compared with the previous year.
Household fee income fell 2.7 per cent to $3.2 billion, while business and government fee income rose 1.2 per cent to $11.3 billion.
Fees accounted for about 10 per cent of bank income. As a share of assets and deposits, they fell as growth in lending and deposit-taking outpaced growth in fee income.
In the household segment, strong competition in mortgage lending was a main reason for the fall in fee income. Banks offered cashbacks, LMI waivers and fee waivers to win business, particularly for loan refinancing.
In addition, rising rates reduced the incentive to break existing fixed-rate loans and break fee income fell as a result.
Fees charged on personal loans fell, while credit card fee income rose. The return of overseas travel and greater use of credit cards overseas was the biggest factor in higher credit card fee income. The average credit card account servicing fee also rose.
There was an increase in transaction account exception fees, caused by higher rates of late payments and overdrawn accounts.
The increase in business and government fee income was due chiefly to strong growth in lending to medium and large businesses. Lending to business was up 13 per cent in 2021/22, its fastest growth in a decade, and business loan fees increased 5 per cent to $5.1 billion.
One of the biggest components of business fees, merchant service fees, fell 7 per cent to $2.8 billion. The RBA said this was because of the slow recovery in international tourism in 2021/22.