Monday, February 16, 2009

Bank Robbery

The new regulations governing ATM fees which are due to come into effect from next month are supposed to provide customers with the benefits of improved competition, informed choice and lower fees. Unfortunately, it seems that no one told the banks. It has been revealed that four of the top five banks have confirmed that they will continue to charge so called foreign ATM fees on top of the fees charged by the owners of those machines. On top of that, it turns out that they will even charge a fee for balance enquiries, before charging a second fee should you choose to continue and actually make a withdrawal. Only one of the big banks is still considering its position.

This situation is so wrong on so many counts it would be a joke if it wasn’t ripping the money from the pockets of hard-working Australians who have no choice but to pay up. First and foremost, it is my belief that there should be no transaction fees whatsoever. Banks pay virtually no interest on the money we deposit into transaction accounts, so to all intents and purposes it is free money for the banks. Yes there is some cost associated with the book-keeping, but the truth is that they are keeping account for their own benefit as much as for yours. The interest that they charge on the money they lend out is considerably higher than the interest they pay to borrow the money from you, and that is supposed to be the profit margin that pays for their overheads. If they want to keep on charging fees, they should stop charging interest! But of course a banking license is a license to have somebody else’s cake and eat it too.

There should be no cost associated with electronic banking at all for the simple reason that we have been forced to be captive to the electronic system. Once upon a time we could demand to be paid in cash, and avoid the banks altogether. Not any more. Now, almost everybody is paid by direct deposit and we have no choice in the matter. There are even businesses who will not accept cash, but insist on electronic funds transfer. EFT has become the de facto currency of the 21st Century, and we have no choice but to use it. Currency is rightfully issued by the sovereign government, and the cost of currency is the responsibility of that sovereign government. And yet, with the de facto currency of the modern world it is we who have been duped into paying that cost through a variety of transaction fees.

Then, if we do insist on using real cash we are stung again at the ATM. If customers from Bank A withdraw money from an ATM belonging to Bank B, Bank B charges Bank A a fee for the use of the machine, and that fee is passed on to the customer. But at the same time customers from Bank B also use ATMs belonging to Bank A, so it would be reasonable to assume that there is no net cost. After all, if I owe you a dollar and you owe me a dollar, then it cancels out. The only possible reason for the banks not to operate a reciprocal arrangement is so that they can reach their long sticky fingers deeper into your pockets, and mine.

In the case of ATMs owned by non-bank providers, a case can be easily made for a modest fee for service. Obviously the owner of the ATM is not your bank and the fee is what makes it profitable for the third party service provider to offer the ATM service in a location where your bank hasn’t bothered to provide one itself. Fair enough. However, for your bank to slug you a fee for having the temerity to check your balance and make a withdrawal at a location where they haven’t bothered to provide a facility to their own customers amounts to nothing more than a greedy opportunistic raid on your money.

Not so long ago we were all slapping each other on the back over how solid our banks are in this time of Global Financial Crisis. Well, that’s why. Rather than being the result of prudent management, it’s more like the spoils of a Great Bank Robbery, only in this case the bandits are wearing the suits and they’re on the other side of the bullet-proof glass.

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