RBA banking data sparks anger among small businesses, as it reveals bank fees have soared in the past three years

Australian businesses have been hit by rising bank fees, with fees jumping 23.9% over the past three years, despite fees for consumers falling, sparking anger from the business community.

Analysis of the fees from the Reserve Bank of Australia released yesterday revealed the escalating fees were being driven by rises in account servicing fees and debit card transaction services.

Charges paid by households fell slightly to $4.1 billion, but the total value of bank fees rose 4.3% to $11.4 billion last year, a result of the higher costs to businesses.

Businesses paid $7.3 billion in 2012 in bank fees, an increase of 7% from 2011.

Council of Small Businesses of Australia executive director Peter Strong told SmartCompany he will be speaking to the banking sector about the high costs.

“Why is it that when you go into business you have to pay more money even though we employ people and we’re the back bone of the economy?

“It makes no sense that the people who carry the economy have more costs. We’re talking to the banking sector this week and will be in discussions with the Australia Bankers Association,” he says.

In an analysis of the data, the ABA said the increase in fees coming from businesses was a result of “increasing bank business volumes” rather than higher fees.

“This is evidenced by the strong downward trend in the ration of bank service fee revenue to banks resident assets since 2001.

“Over the past five years, bank assets have been growing on average by 9.4% per year. This is 2.6 times faster than the average growth in the bank service fee revenue (3.6%) over the same time,” the ABA analysis says.

The ABA also applauded the banks reduction in fees to households.

“Compared with three years ago, bank fees paid by households have fallen by $1.12 billion or 22%. In 2012 bank service fee revenue from households fell by $13 million (0.3%),” the ABA says.

For businesses, the RBA’s analysis concludes a growth in the number of business loans, more costly account servicing fees and fees earned by merchant services contributed to the high revenue from fees.

The 2012 increase in merchant fees was the largest since 2007 and approximately 70% of these fees are paid by small businesses.

“[It] reflected the growth in the number of transactions, particularly debit card transactions, and changes in the pricing for some services (partly as a result of the pass-through of some changes to interchange fees),” the RBA says.

Australian Chamber of Commerce and Industry chief economist Greg Evans said yesterday the banks had increased their fees beyond the underlying costs of delivering services to business and they were using higher fees to subsidise lower household costs.

“Account service fees and loan review fees are paid with no benefit to customers and they are becoming a lucrative and growing revenue source for these institutions,” Evans told The Age.

“Ultimately, competitive pressure should be the answer, but in its absence lenders are exerting significant pricing power,” he said.

CPA Australia business policy advisor Gavan Ord told SmartCompany bank fees will only be driven down if there is more competition in the business lending market.

“Businesses should go out and ask their lenders about the fees they’re paying and if they can reduce it. If they say no, go and look at another potential lender.

“Businesses themselves have to create the competition for their business,” he says.

Ord says the banks are unlikely to produce competition within themselves, so businesses need to lead the change by actively asking and looking for lower fees.

“For business, the best way to ask is to start early. Prepare your documentation, ask questions and maybe go through a commercial finance broker.

“If businesses were to be more proactive, banks would have to respond by producing more competitive rates. They keep saying they want to lend to business, so make them work for your business,” Ord says.



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