BASSETERRE, St. Kitts - Canada’s big banks are among the world's most successful. Two are in the global Top 20. Four are in the Top 50. The largest five (5) banks generated profit of $35 billion in 2015. That exceeds the annual budget of Ontario's education ministry by almost 50 percent.
And despite deteriorating conditions within international markets, three of the big banks raised their dividends first quarter of 2016. That's great news for bank shareholders.
The bad news is that to keep making that kind of money, they're looking under every rock for revenue sources, including fees.
The Canadian Bankers Association says fees make up 5 percent of bank revenues, which seems small as a percentage. CIBC, the smallest of the big banks, had revenues of $13.9 billion in 2015.
Several banks raised their consumer-based fees last year (2015), which contributed to their profitability. Some modest increases are in the works in this year, and 2017, and it pays to keep an eye on fees because they add up. RBC’s recent decision to increase fees not withstanding.
CIBC's changes took effect last month (April) for their Canadian customers and were the most substantive. As an example, the bank's widely used Unlimited Checking Account becomes the Smart Checking Account. The big difference with the changed account is unlimited e-Transfers and a sliding scale of transaction fees, where fewer transactions mean a lower cost. The fee level starts at $4.95 and is capped at $14.95, higher than the cap on the account it replaces.
Many banks are worried about cheaper mobile banking options that don't include many fees, no-frill options that appeal to young and old alike.
Additionally, with passage of FATCA worldwide, greater administrative costs in complying with increased regulations are compelling banks to look to their fee structures to offset these expenses.
Financial technology innovations are making it cheaper and more convenient to bypass the banks. This is why they are pushing customers toward their mobile technologies.
Bank fees, and fee increases, are here to stay because-- like it or not-- the services banks provide cost money.
Bank customers must keep an eye on fees, and when deemed prudent, exercise their right of competitive choice.
