Businesses digging deep as bank fees soar

On the back of a small 0.7 of a percentage point rise in 2016, bank fees surged by 3.6 per cent in 2017, hitting $13.041 billion for the calendar year.

That rate of growth was almost twice the rate of inflation, which stayed below 2 per cent for much of the year.

Roughly two-thirds of the fee income came from businesses, contributing a collective $8.541 billion.

“Total fee income from businesses increased by 3.8 per cent in 2017, entirely reflecting higher fee income from small businesses,” the RBA report said.

“Growth in fee income was driven by increases in merchant service fees on card transactions and account servicing fees on small business loans. Fee income from deposit accounts and from other sources (such as fees related to bank guarantees and overseas transactions) also increased, while fee income from bank bills continued to decline.”

However, when it came to lending, rising fee revenues was attributed to increased lending to SMEs rather than higher fees for established borrowers.

“The increase in fee income from business loans in 2017 reflected higher fee income from small businesses, while fee income from loans to large businesses fell,” the report said.

“The increase in fee income from small businesses was driven by an increase in account servicing fees attributed to growth in lending volumes, which is consistent with the relatively strong growth in lending to smaller businesses over 2017.”

Around 90 per cent of these fees were paid to the big four banks.

Households, meanwhile, contributed $4.5 billion in fees, up by 3.1 per cent from 2016.

Fees and charges on personal credit cards showed “strong growth”, the RBA said, while fees on housing and personal loans were moderate, and fee growth on deposits remained flat, having fallen in the previous two years.

[Related: ‘Innovation’ is key for improving SME finance outcomes: RBA]