Commercial banks' fee-based income from money transfer services, starting from this quarter, is expected to decline significantly after most waived digital banking transaction fees, says a senior official at the Bank of Thailand.
The effect from scrapping digital transaction fees has yet to be seen in the industry's fund transfer income fees, as most waivers began from late March, said Daranee Saeju, senior director of the financial institutions strategy department.
However, fee-based income growth from fund transfers rose by 8.8% year-on-year for the three months through March, albeit at a slower pace than the 9.3% year-on-year increase in the previous three months.
Siam Commercial Bank (SCB) made waves in late March by scrapping its fees for interbank and cross-clearing zone fund transfers, bill payments and top-up transactions over online channels, with the aim of attracting a larger number of users for its mobile application, SCB Easy. The bank's move compelled other banks to follow suit.
Ms Daranee said the banking industry's total fee-based income growth rate was 8.2% for the first quarter of the year compared with 10.4% in the previous quarter. The slowdown was largely attributed to a decline in commission fees from the bancassurance business, where growth fell sharply from 49% in the preceding three months to 21.2%.
In 2017, commercial banks' fee-based income derived from fund transfers amounted to 24 billion baht, representing 12% of their total fee-based income at around 200 billion baht, she said.
Commercial banks' fee-based income of almost 200 billion baht, in turn, represented 20% of total revenue.
Branch expenses last year increased by 3.6% in the first quarter from 1.2% in the previous quarter despite the physical branch network shrinking to 6,739 at the end of March from 6,784 branches at the end of 2017.
She said fixed costs continue to push up expenses for branches.
Employee costs for the first quarter increased by 3.6% compared with a 3.9% decline in the previous quarter. Banks plan to spend more time gradually cutting branch and staff expenses amid the digital transformation.
Commercial banks managed to deliver a 1.1% increase in operating profit for the first quarter, but their aggregate net profit fell by 2.2% year-on-year because of larger impairment charges for loan losses to comply with higher loan loss provisions in preparation for International Financial Reporting Standards version 9 (IFRS 9).