Recovery in international travel boosts banks' household fee revenue

John Kavanagh

Bank fees paid by households increased in the year to June 2023, thanks to higher charges on credit cards used for international travel, but overall fees charged by banks fell over the year.
 
Fee income fell by 3.8 per cent in the year to June 2023 and made up 5 per cent of banks’ total revenue over that period. It was the sixth consecutive year of decline in overall bank fee revenue.
 
Of total fees of A$13.9 billion, businesses paid $10.5 billion and households $3.4 billion. 
 
Fees paid by households increased by 4.8 per cent, with much of the growth coming from foreign currency conversion charges and overseas ATM withdrawal fees. Credit card fees represented a little under 1 per cent of the total value of credit card transactions in 2022/23 – the highest proportion since the late 2000s.
 
Fees on credit cards rose 28 per cent to $1.4 billion, accounting for 42.4 per cent of all fees charged to households. Credit card fees are now the largest source of bank fees paid by households, overtaking housing loan fees for the first time in 2022/23.
 
Another factor was higher break fees on term deposits, as rising interest rates encouraged households to switch between deposit products. Deposit fees rose 31 per cent to $796 million.
 
Slower credit growth resulted in a fall in establishment fees for housing and personal loans.
 
The RBA said competition in the mortgage market cut into housing loan fee revenue, as banks offered incentives like cashbacks to win business (the RBA subtracts cashbacks from fee revenue in its calculation of housing loan fees).
 
Fees paid by businesses fell 6.2 per cent, which the RBA said was largely the result of lower merchant payment processing service fees. This reflected the ongoing shift in consumer payment preference from credit to debit cards (the decline also reflected the growing market share of payments service providers not captured in the data).
 
Apart from the 13 per cent fall in merchant service fees, loan fee income was flat due to slower business credit growth.