Banking Review

Could this be the demise of foreign ATM fees?

BankWest has lobbed another grenade in its mission to lure customers away from the big four, with the launch of another fee-free transaction account.

The account does away with the foreign ATM fees still charged by the majority of banks offering low fee or “all-you-can-eat” transaction accounts. Although customers will still be up for overseas ATM access and foreign transaction fees, this is the first time a large bank has offered them the chance to avoid the fees they are charged when using another bank’s ATM.

The challenge will be for BankWest to raise awareness, particularly amongst consumers that regularly pay such fees without realising it.

BankWest says it’s all about making customers happy by giving them what they want. The bank has recognised it’s word of mouth and referrals that drive people to switch banks, and you don’t get referrals by building what the proponents of the Net Promoter Score call “bad profits.”

Last month’s post on a banker’s view of innovation highlighted how banks are acknowledging this issue.

I suspect the major banks will be forced to respond to BankWest’s offering.

Pressure is already coming from the Reserve Bank, which revealed in its cost of payments study that the actual cost of an ATM transaction is closer to 50 cents, far less than the average $2 fee charged by most banks. Next year the industry will begin charging customers directly for ATM transactions, rather than the current complex system of charging eachother interchange fees.

Reserve Bank head of payments policy Michele Bullock has challenged the banks to rethink how they set foreign fees. At least one bank is listening.