Easy profit from service feesBanks have been gradually upping various service fees. Last month, Shinhan Bank raised some of its charges on wiring money overseas. KEB Hana Bank then copied with similar move.
It also upped fees by 100 won to 200 won to transmit money to other bank accounts from its ATMs. Citibank and SC Korea First Bank have followed suit and Woori Bank is also considering new charges. The hikes in bank service fees ensued and spread upon sensing little protest on the consumer front. KB Kookmin Bank announced that it will be pushing up all of its service charges from June 1.
Its customers transmitting money to another bank would be charged up to 1,500 (up 60 percent) while service fees on issuing documents or new bank accounts will be upped 50 percent, or 1,000 won. The fee to change bank account ownership will jump by 100 percent or 5,000 won, and 100 won to 200 won will be added to uses of automated unmanned services. Oversee money transfer through online and mobile accounts also would no longer be free.
Banks have decided to raise service fees amid deteriorating profitability. Their primary revenue from the gap in lending and deposit rates has sharply decreased due to prolonged low interest rate environment.
Banks complain of higher maintenance cost because rises in service fees were capped by authorities over the last five years. But data tells another story. Sixteen commercial banks last year raked in combined profit of nearly 5 trillion won from service fees. They might as well admit that digging into their customers’ pockets is the easiest means to make money.
Higher service charges cannot be a lasting solution to banks’ profitability. Banks must explore revenue bases beyond the profiteering from the difference in lending and savings rates. They should first of all restructure high-paying job structure. Local banks fare poorly than African counterparts in competitiveness because they rely on easy means to make profit. Authorities also should have closely studied whether the hikes are justifiable before endorsing them in mass.
JoongAng Ilbo, May 25, Page 30