2018-07-26
The survey of commercial banks’ fee and commission income conducted by the Bank of Lithuania revealed that residents who chose a basket of payment services have saved substantially, while paying to banks mostly for cash transactions. The increase in banks’ income from the baskets offered to companies and from the application of an account handling fee was offset by a decline in commissions from incoming payments.
‘The survey revealed that the different baskets of payment services offered last year help to save. Yet almost every second customer still uses the old payment mode when each service is charged separately. Such customers in many cases overpay, sometimes even the double amount. We would thus urge residents to reconsider their choice. To encourage to change payment habits even more and choose the most rational offer of payment services, in the autumn we in turn will revise the pricing methodology for the basic payment account and the price itself,’ says Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania.
According to him, this will be done in line with legal acts after public consultations, including consultations with financial market participants.
Based on the survey data, at the end of 2017 different baskets of payment services had been chosen by 1.6 million bank customers, yet about 1.5 million customers each time paid for the services separately, e.g. for transfers in euro, cash transactions, handling of the account, etc. Residents who have chosen a basket of payment services paid on average €10.4 over the year for the basket chosen and made use of all of the services covered by it.
Those who have not chosen a basket not only made use of fewer payment services but even paid more than double for them – more than €22 over the year. Handling of account made up the largest share of expenses (about a third), cash withdrawals at ATMs – somewhat less (30%), and the remaining amount was paid for payment cards and transfers in euro.
The majority of residents who use a basket find the services covered by the basket sufficient, paying just a commission fee for it. A small share (about a tenth) of those who have chosen a basket, however, made use of services in excess of the composition of the basket. Residents paid about €8.8 over the year for those services on average. They paid the most for ATM cash transactions (after exceeding the amount of cash withdrawals allowed by a given basket or using an ATM of another bank in Lithuania or abroad) and for additional payment cards.
According to the survey data, last year banks’ total fee and commission income amounted to €241 million, an increase of 14% from 2016. More than two-thirds of this amount was earned by banks from payment services; natural and legal persons paid for payment services a similar amount (€83 million and €85 million respectively).
Banks’ fee income increased due to a more intensive use of services, combined with pricing changes. E.g., payments using payment cards increased significantly (17%), the use of e-invoices (15%), and cross-border transfers (8%) in 2017. The main changes in the pricing include the emergence of baskets of payment services and the elimination of the fee for incoming payments, which from now on is included in the fee for handling of the account.
Over 2017, banks’ income from handling of accounts of companies and natural persons grew by about €14.4 million. Those who do not have a basket of payment services pay for the handling of their account separately, while most banks have raised their fees for this service, as well as began applying a fee for accounts that previously were handled free of charge. However, handling of an account also includes management of incoming payments, for which a fee is not applicable; as a result, companies and residents paid €8.6 million less over the year.
Urged by the Bank of Lithuania, commercial banks took active action this year and closed more than a fourth (about half a million) of total dormant accounts of customers. They also assured that, for clients whose accounts are empty and unused for a long time, closing them will cost nothing.
Last year, most – a fourth (€22.3 million) of residents’ expenses incurred for payment services – were comprised of cash withdrawals from ATMs. It should be noted that even 40% of these expenses were comprised of the fee for transactions abroad and at the ATMs of other banks.
‘The situation of consumers in the very concentrated payments market is mostly improved by new strong market participants, who, by attracting new customers, make the old ones ‘move’. We continue making effort for such newcomers to increase in number and expect the consumers to increasingly see tangible results shortly.
At present the Bank of Lithuania is investigating three applications for a licence of a specialised bank which, among other things, would authorise to provide payment services. Moreover, since early 2017 the Bank of Lithuania has already granted about half a hundred authorisations for payment and e-money institutions competing in the payments area. About 30 more applications are currently being examined.