Banking fee revenue from businesses rise to $7 billion

Banking revenue from fees charged to businesses during deposit, loan and payment transactions rose by 5.5 per cent to $7.3 billion last year, the latest Reserve Bank survey found.

This pushed up the total banking fee revenue in Australia to $11.3 billion, up by a marginal 0.7 per cent. This was driven by a seven per cent decline in revenue from households to around $4 billion as a result of a drop in housing loan and deposit fees across the board; but was also attributed to a rise in banking fee income from businesses, in particular from fees on loans and bank bill facilities.

According to an analysis of this data conducted by the Australian Bankers' Association (ABA), 56 percent of total business bank fee revenue came from small businesses. Large businesses contributed the other 44 per cent.

"The large numbers of small businesses in Australia, estimated to be nearly 2 million, compares with 90,000 medium and large businesses. These volumes alone cause fees paid by small businesses to exceed that of large businesses," said the ABA.

The growth in banking fee income from businesses was mainly due to a 4.2 per cent rise in fees charged on business loans, despite a slight fall in business lending during the year; and a 23.2 per cent increase in charges on the arrangement of bank bill facilities and accepting or endorsing bank bills.

Merchant service fee income also rose by nearly four per cent, which are incurred when a business merchant processes a credit or debit card transaction, and is paid by around 70 per cent of small businesses.

Conversely, fee income from business deposits (both small and large business accounts) dropped by three per cent in 2011, although deposit balances rose by 15 per cent. Exception fees, which are charged when a customer makes a late payment, overdraws his/her account or exceeds a credit limit, also fell by 22 per cent on deposit accounts.

The RBA said that this fall benefits small businesses as they incur around 85 per cent of total business exception fees.

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