Sydney, 17 May, 2007: The average price¹ of banking services in Australia continues to fall, according to a report by Macquarie University academic, Professor Kim Hawtrey.

The ‘Fees for Banking Services 2007 Report’ finds that customers are choosing cheaper banking options and the number of transactions continues to increase, resulting in a decline in the average price of banking services.

Professor Hawtrey explains that bank fee revenue is influenced by:

Why is the price falling?

A key reason is the changing usage patterns of customers. Bank customers continue to shift away from higher cost, traditional ways of transacting (cheques and over-the-counter) toward electronic forms (ATM, EFTPOS, credit card transactions and direct debit). The latter are generally cheaper and often involve no transaction fees.

Secondly, competition among financial institutions is providing greater customer choice, expanded product ranges and more competitive pricing. Customers who complete a lot of transactions may choose an ‘all-you-can-eat’ account which gives multiple free transactions for a simple flat fee such as $5 a month. Other customers may choose a basic bank account which charges no monthly fee, but has other restrictions.


Why is volume increasing?

While bank fee revenue increased by 5.8% to $9.8 billion in 2006, this was affected by increases in the number of transactions and accounts.

For example, there was significant growth in transaction volumes across a range of banking services. Credit card transactions rose 7%, EFTPOS up 10%, direct entry up 7%, housing loans up 10%, personal loans up 10% and commercial lending commitments up 23%.

The number of accounts also grew. For example, credit card accounts rose 6% (an increase of three quarters of a million accounts) and ATM accounts grew by 4% (an increase of more than one million accounts).


International comparisons and low income customers

The report notes that low income groups in Australia such as students, pensioners and low income families have access to some of the least expensive banking services in the world. Australia ranks at the bottom half of the ladder for all three demographic groups because these groups have access to low-cost or no fee banking options.  Also, a range of international comparisons show Australian retail banks’ fees around mid-range compared to overseas peers.


Switching

Banks are aggressively competing for consumers, one indication is that low-cost transaction account offerings have grown by 18%. To assist customers switch accounts, some banks have online tools which help consumers transferring regular payments to the new account.

The ABA, its member banks and the Australian Payments Clearing Association (APCA) are researching means of making portability of standing instructions easier. A public consultation of options is expected in June 2007.

For further information:

Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439

Dr Kim Hawtrey
Macquarie University
Mobile: 0404 476 012

ENDS