Time to rein in bank fees
Most consumers of financial services in Thailand have been charged here and there for almost every kind of transaction and service contract they entered into without banks providing clarification about relevant operational costs. Worse still, they have not had much choice in the matter as most banks apply fees and charges.
The latest decision by the Bank of Thailand (BoT) to regulate three types of fees and charges that financial institutions impose on their customers is therefore a good start towards giving consumers a fairer deal. But more still needs to be done.
Starting this year, the central bank requires that financial institutions adjust early payoff penalties applicable to small and medium-sized enterprises (SME) and personal loans, and alter late-payment fees for SME, personal and mortgage loans based on actual costs. It also requires that replacement fees for ATM and debit cards and PIN numbers are waived, although financial institutions are still allowed to charge some fees if the costs incurred are significant.
According to the central bank, the measures are aimed at establishing a fairer fee structure that better reflects actual costs, reduces affordability risk and alleviates financial burdens on consumers and SMEs.
The move could have come sooner as consumers have questioned and complained for years about numerous fees and charges. In fact, it should review the entire structure of bank fees and charges to find out if they are too high or reflect the actual operational costs, and then apply a certain level of regulation to them.
For years, consumers here have been forced to accept similar levels of fees and charges across all of Thailand's banks. This has led many to question whether there is a lack of competition in the sector.
For instance, banks charge fees just for customers to open accounts or get ATM cards and then to maintain these services. Transaction fees are also applied by most banks whenever customers transfer or withdraw money via ATM machines. These are just a few among dozens of service fees.
It is questionable whether fees applied on services such as ATM transactions, which, according to TMB Analytics, account for about 22 billion baht of banks' revenue, are justified and reflect actual operational costs. Without a doubt, there have been investments in IT, technology and equipment on the part of the banks as well; however, over past years, they must have already earned enough from service fees to offset their investment costs.
In 2017, the combined annual revenue of all banks generated from fees and charges was 196 billion baht. In the third quarter of last year, 14 commercial banks earned a total of 30.2 billion baht in revenue from fees and charges, while their operating costs were 8.2 billion baht, according to the BoT. That means they reaped a total profit of 22 billion baht from just fees and charges in one quarter.
Some banks have waived certain service fees in recent years, but the majority of them have not done so. The only exception is the fee waiver for digital transactions which was implemented by most banks since early 2018. This was an easy concession to make as there are low or no actual costs incurred with online banking.
The banking sector has earned handsome profits for years from other types of income such as charging interest on loans. The central bank needs to do more to bring about fairness and protection for consumers by ensuring that the service fees and charges of our banks are regulated properly, reasonable and reflect the actual costs incurred.
Bangkok Post editorial column
These editorials represent Bangkok Post thoughts about current issues and situations.
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