China's Banks Mull Retail Banking Fees
As part of a further move towards western style banking
in China, China's major banks are now contemplating the
introduction of retail banking fees. But, when it comes
to implementation, the Central Banking Regulatory Commission
and the People's Bank of China, China's central bank,
are in conflict with each other.
Under a CBRC order dated October 1, the banks are allowed
to introduce their own retail banking fees for services.
Up until now, retail services such as checking, deposit
and money transfers are all offered as free services.
As part of its effort to lift the level of service in
Chinese banks, and to prepare for the entry of international
retail banks into the China retail market, which are mandated
under China's WTO entry, CBRC has pushed the local banks
to introduce service fees for checking, money transfers,
electronic money transfers and other services in retail
banking. CBRC is pushing for set fees for these services,
which would empower it to set the fees for all the banks.
However, the People's Bank is pushing for less restrictions
for banks. It is pushing the position that a set fee would
only be set for electronic money transfers, while the
banks would competitively set their own fees for all other
services.
Faced with this conflict, so far all the banks have chosen
to not introduce any fees just now. Right now, all the
banks have asked their branches to provide feedback on
what would be sensible fees to charge their customers.
Since China's banks widely use smart debit and credit
cards (cards with embedded memory chips) to record customer
information and transaction history, a major question
is whether an annual fee should be charged for smart card
use.
Because almost all of China's banks are owned by the
state, most of them are not able to figure out the cost
of a service. As a result, they are only able to compute
how receptive the market is to a new service, instead
of the cost. The main advantage for non-Chinese banks
entering the Chinese market is that not only do they have
an idea of the cost of a new service, they also use their
service fees to define the position of the bank in their
marketing.
This is something which Chinese banks do not know how
to do yet.
Before you go, did you like this article?
If so, you can receive a free email newsletter version
each weekday. Sign up using the China Business Express
form on this page.
