The Reserve Bank has conducted a survey on bank fees each year since 1997. The results of the

most recent survey suggest that banks’ fee income from both households and businesses rose

in 2015, due to a combination of balance sheet growth and higher unit fees on some products.

Deposit and loan fees have continued to decline as a ratio to the outstanding value of deposits

and assets, respectively.

The Reserve Bank’s annual survey of bank fees provides information on the fees earned by banks through their Australian operations.1 The focus of the survey is on fee income generated through the provision of loans, deposit services and payment services. The 2015 survey included 16 institutions, capturing over 90 per cent of the Australian banking sector by balance sheet size.2 Fees earned from operations outside of Australia and other fee income obtained through funds management and insurance operations are excluded from the survey. This article summarises the results from the latest survey, covering banks’ financial years ending in 2015.3

In 2015, domestic banking fee income grew by 3.5 per cent, to around $12.5 billion (Table 1).

This reflected moderate increases in fees paid by both households and businesses, driven by a combination of volume growth and increases in -

1 The data from the survey are published in the Reserve Bank’s Statistical Table C9, ‘Domestic Banking Fee Income’, and are subject to revision on the advice of participating banks.

2 Survey results have been affected by mergers and acquisitions among participating institutions and some changes in participants’ methodology (wherever possible, this has been reflected in revisions to data reported in previous years).

3 Apart from Table 3, all data from the survey are based on individual banks’ financial years, which differ between banks.

some unit fees. Deposit and loan fees as a ratio

to the outstanding value of deposits and assets,

respectively, were slightly lower than in the previous

year (Graph 1).

* The author is from Domestic Markets Department.

Annual growth

0

15

%

0

15

%

Ratio to assets*

0.15

0.30

%

0.15

0.30

%

Lending fee income

Other non-deposit fee income

Ratio to deposits*

1999 2003 2007 2011 2015

0.00

0.25

0.50

0.75

%

0.00

0.25

0.50

0.75

%

Deposit fee income

* Adjusted for breaks in series in 2002 due to a change in banks’

reporting; financial-year average assets and deposits have been used

Sources: APRA; RBA

BANKING FEES IN AUSTRALIA

Banks’ fee income from households grew by

2.9 per cent in 2015, the third consecutive year of

Fee income from credit cards, the largest single source of fee income from households, increased strongly in 2015. The increase in fee income from credit cards was due to both more instances of fees being charged and an increase in unit fees on some products. An increase in currency conversion.

2013 2014 2015 Annual

growth 2015

Average annual

growth 2007–14

$ million $ million $ million Per cent Per cent

Loans: 2 904 2 999 3 135 4.5 2.2

– Housing 1 218 1 219 1 251 2.7 1.8

– Personal 350 366 376 2.7 2.2

– Credit Cards 1 335 1 414 1 508 6.6 2.6

Deposits 1 111 1 108 1 083 –2.3 –7.8

Other fees 103 100 111 11.3 1.9

Total 4 118 4 206 4 328 2.9 –1.3

Source: RBA

Households Businesses Total

Level Growth Level Growth Level Growth

$ million Per cent $ million Per cent $ million Per cent

2012 4 054 –0.7 7 368 7.2 11 421 4.3

2013 4 118 1.6 7 593 3.1 11 711 2.5

2014 4 206 2.2 7 872 3.7 12 079 3.1

2015 4 328 2.9 8 176 3.9 12 504 3.5

Source: RBA

Total

Housing loans

Deposits

Personal loans

Credit cards

Other

2003 2006 2009 2012 2015

-20

-10

0

10

20

%

-20

-10

0

10

20

%

Contribution by product

Source: RBA

BANKING FEES IN AUSTRALIA

fees incurred by households for overseas purchases

was largely a result of an increase in the number

of foreign currency transactions, with only a small

increase in average unit fees (Table 3). Banks

increased some unit fees during 2015, in particular

those relating to credit card annual fees and

cash advances. Several banks also increased fee

income from credit cards through the acquisition

of existing credit cards from other providers.

Some improvements to participants’ reporting

methodologies also resulted in the inclusion of

some credit card fee income that was previously

being excluded from the RBA’s survey.

Income from exception fees charged to households

on credit card products continued to decline in

2015 (Graph 3). This was the result of customers

reducing the number of instances in which they

exceeded their credit card limits or made late

payments.

The main drivers of modest growth in fee income

on personal lending were higher unit fees and

increased turnover. Some banks also increased

lending volumes, resulting in higher establishment

and loan registration fee income.4 Income from

4 Fee income from personal loans was also affected by improvements

to participants’ reporting methodologies, resulting in higher fee

income in 2015 being reported from this category than would have

otherwise been the case.

exception fees and transaction fees on personal

lending declined.

Growth in fee income from housing loans was

consistent with housing credit growth during 2015.

Higher fee income was due to a higher volume

of new loans, more instances of early repayment

fees and, to some extent, higher unit fees on home

loan packages. The major banks and large regional

banks recorded the highest growth in housing loan

Total

Housing loans

Deposits

Personal loans

Credit cards

2009 2010 2011 2012 2013 2014 2015

-60

-40

-20

0

20

%

-60

-40

-20

0

20

%

Contribution by product

Source: RBA

2013 2014 2015 Annual growth

2015

Per cent

Annual fees ($)

Non-rewards cards 61 51 53 4.7

Rewards cards 170 186 185 –0.5

All cards 127 134 133 –1.1

Other fees

Foreign currency conversion fees

(per cent of value)

2.8 2.9 2.9 0.3

Late payment fee ($) 19 19 17 –8.4

(a) Simple average fees for cards issued by a sample of seven banks; only cards that are available to new cardholders are included

in the sample; note that changes in the sample affect the average fee; as at June of each year

Sources: Credit card issuers’ websites; RBA

BANKING FEES IN AUSTRALIA

Growth in merchant fee income over 2015 was

evenly spread across small and large businesses.

The increase in income from merchant fees was

largely a result of growth in the number and value

of transactions, resulting from a higher number of

merchant terminals on issue and increased use of

contactless payments. This partially offset a decline

in fees earned on cash payment services, via ATM

and deposit account withdrawals. A few banks also

increased unit fees on merchant services, although

the ratio of merchant fee income to the value of

credit and debit card transactions continued to

decline during 2015 (Graph 6).

fee income, while some smaller regional banks

reported declines in fee income as a result of lower

volumes of loans.

Fee income from deposit accounts declined further

over 2015. The decline in fee income was broad

based across most types of deposit fees, but there

were notable declines in fee income relating to

non-transaction accounts such as term deposits

and online savings accounts. The introduction

of notice periods for ‘breaks’ on term deposit

contracts has resulted in fewer instances of these

fees; where customers were previously charged a

fee for breaking the duration of their term deposit,

31-day notice periods for withdrawals have resulted

in fewer banks charging these fees. In addition,

customers have shifted towards deposit products

with lower fees, such as online savings accounts.

Higher use of contactless payments facilities and

decreased use of cash has also led to fewer ATM

withdrawals and therefore fewer charges. Some

banks lowered their unit fees on international

withdrawals from deposit accounts, resulting in

declines in fee income from this activity. Somewhat

offsetting these declines, income from other fees

(such as currency conversion fees) and exception

fees on deposit accounts increased (Graph 3).

Total fee income from businesses increased

by 3.9 per cent, primarily reflecting higher fee

income from small businesses (Graph 4; Table 4).

By product, growth in fee income from businesses

continued to be driven by merchant fees and

business loans (Graph 5). Fee income from bank

bills declined sharply in 2015, similar to previous

years. Fee income from other business products was

little changed.

The increase in loan fee income was mainly due

to increases in unit fees for small business loans,

although lending volumes also increased. Loan fee

income from large businesses declined over 2015

as several banks lowered their unit fees due to

increased competitive pressures.

Total

Small business

Large business

2003 2006 2009 2012 2015

-10

0

10

%

-10

0

10

%

Contribution by business type

Source: RBA

Total

Deposits

Business loans

Merchant

Bills

Other

2003 2006 2009 2012 2015

-10

-5

0

5

10

15

%

-10

-5

0

5

10

15

%

Contribution by product

Source: RBA

BANKING FEES IN AUSTRALIA

2013 2014 2015 Annual

growth

2015

Average

annual growth

2007–14

$ million $ million $ million Per cent Per cent

Deposit accounts 606 589 587 –0.3 –4.9

Loans 3 276 3 372 3 460 2.6 10.5

Merchant service fees 2 241 2 427 2 651 9.2 5.8

Bank Bills 226 204 190 –7.1 16.6

Other 1 258 1 280 1 287 0.6 8.7

Total 7 593 7 872 8 176 3.9 6.9

Source: RBA

Value of merchant service

fees collected

2006 2011

1.0

1.5

2.0

2.5

3.0

$b Share of the value of credit

and debit card transactions

2005 2010 2015

0.8

1.0

1.2

1.4

1.6

%

Source: RBA

Somewhat offsetting growth in merchant and loan

fee income, bank bill fee income declined over

2015. This reflects a broader shift away from the use

of bank bills and encouragement from banks for

customers to shift to alternate products.

Fee income from business deposit products also

declined slightly. This was mainly due to a reduction

in deposits held by these customers; however,

the decline in fee income was also the result of

customer switching between deposit accounts in