Banking Review

Ending the fee for all

Bank fees look set to become an election issue with politicians and consumer groups stepping up their campaigns on the back of a Senate inquiry into fair fees.

A bill tabled by Family First Senator Steve Fielding seeks to prohibit penalty fees on failed transactions that are beyond the control of the customer, and ensure such fees reflect the actual administration cost to the bank.

We first covered the issue here in the July/August edition of Retail Banking Review.

With the senate committee due to report its findings, banks have been scrambling to demonstrate they can do the right thing by customers.

NAB, ANZ, Westpac, St George and Bank SA have all dropped the fees charged on concession accounts, and both ANZ and NAB have made recent announcements regarding more widespread simplification or removal of fees.

It’s these latest announcements that have the cynics convinced – banks will only act to “do the right thing” when they’re forced to by strong consumer sentiment or regulation. Senator Fielding says these are “token gestures and far too late”.

How banks react in the next few months could have a huge impact on customer advocacy.

In its submission to the inquiry, ASIC predicts further announcements from institutions as the increased public focus on the issue drives greater competition.

But beyond the obvious marketing spin, banks can make some simple changes that would help reduce cynicism and increase advocacy.

In its submission to the inquiry, the Australian Banker’s Association again reinforces its oft-repeated argument that penalty fees are avoidable. But what if banks actually took some of the responsibility for helping customers avoid penalty fees, other than via fact sheets or educational pieces?

For example, as the St Vincent de Paul Society points out in its submission, banks should be encouraged to find technological solutions to ATMs authorising withdrawals beyond known bank balances, bank balances showing uncleared funds, or credit card “limits” being exceeded.

Likewise, banks could also provide amnesty for first-time offenders or grace periods for overdrawn accounts, as is already practiced by NSW Teachers Credit Union and Savings & Loans Credit Union.

Finally, perhaps it’s time to debate whether “all-you-can-eat” flat-fee accounts are really doing customers any favours (as the banks that offer them often argue). Credit union industry group Abacus has conducted research which reveals if credit unions were to adopt a “$5 all-you-can eat” account-keeping fee model, some 80 per cent of members would pay more in fees.

The fact that these accounts have proven so popular proves the billions of dollars the major banks spend in advertising is working. Customers also like to know what they’re up for in advance.

But banks should not mistake this popularity for trust. With bank fees again in the headlines customers will be looking for more than another announcement on how to save on fees.