Bank fees fall amid electronic take-up
04 September 2006

Bank account fees are falling as banks look to cut costs by encouraging more customers to transact electronically.

ASB Bank has consolidated its five transactional accounts into three, two of which would have no electronic transaction fees. Its Streamline account customers would also not be charged a $3 monthly base fee if they chose not to receive statements in the mail.

Early last month, ANZ launched Everyday Account with a flat $5 a month fee for unlimited electronic transactions. Massey University director of banking studies David Tripe said the cost of transaction processing had fallen during the past few years and banks might be passing on some of those savings to customers.

Banks could also be fine-tuning their products in preparation for the looming battle for mortgage customers. A wave of two-year fixed-interest rate mortgages would come up for renewal toward the end of the year after a price war in 2004 and early 2005.

"There is going to be a whole new arena for competition and it would not be unreasonable to to expect that things might get quite active in the market segment," Dr Tripe said. People would consider the entire banking package if they were looking at switching when their mortgage came up for renewal, he said.

ASB head of retail banking Ross McEwan said electronic transactions had grown rapidly while branch transaction had been static. ASB's online savings account, Fastsaver, had attracted $3.5 billion in deposits after just 18 months. "It has shown that people are quite comfortable dealing online and electronically."

The branch network was increasingly becoming a sales and advisory outlet and provided an assurance for customers that there was somewhere they could go to bank direct, Mr McEwan said. "Future trends, we believe, will be more and more electronic so therefore the transaction accounts structuring should reflect that." He said customer research showed people valued simple account and fee structures over earning small amounts of interests which became almost worthless after tax. Though the bank would forego the fee revenue, that would be partly offset by not offering interest on deposits on two of the three accounts.

Less than 20 per cent of the bank's revenue of $1.15 billion came from fees, Mr McEwan said.He would not say exactly how much the bank would forego in fee income "but it is millions". The bulk of customer complaints related to fees which were a cost to the bank to deal with. "If we can simplify the structure so people know what they are paying for, that goes a long way to help with the customer satisfaction as well," Mr McEwan said.

- The Dominion Post