Banks have weak claim for raising ATM fees

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Banks in Vietnam have been lobbying hard for permission to raise the fees they charge customers for using automated teller machines (ATMs), but new data suggests they could already be enjoying fat profits from the business.

Several industry insiders told Vietweek that with the fast growing customer base for cards, banks have collected more than enough funds through various kinds of fees. The large amount of money that ATM cardholders have in their accounts also provides a cheap source of funds, which banks can use to make profit if they want to, they said.

According to the State Bank of Vietnam, commercial banks in Vietnam had issued nearly 38 million cards as of the end of June. The holders of these cards had a combined VND68.5 trillion (US$3.3 billion) in their accounts at the time.

The money, treated by banks as non-term deposits, is subject to a low interest rate of 2 percent per year, which translates to a total $66 million. To attract the same amount of money in term deposits, banks would have to pay at least 9 percent interest, or up to $300 million a year.

Among the fees that banks charge their card clients are a one-time issuance fee of VND50,000-100,000 and an annual membership fee of VND50,000. Lenders also collect money from card owners of other banks for using their ATMs.

Claiming that they were losing money from operating ATMs, some lenders are planning to increase transaction fees. They even want to begin charging up to VND3,300 for every cash withdrawal by their own clients.

The central bank in June banned banks from doing so, saying the use of cards needs to be encouraged. Still, it allowed banks to create plans for fee increases, if needed, as long as the hikes do not take place this year.

Analysts have said Vietnam's card market remains in a nascent state, but it has continued to see strong growth in terms of both number of cards in circulation and the number of transactions.

Many companies in Vietnam are paying salaries via banks instead of cash, leading to more new bank accounts being opened and increasing demand for ATM cards. The country now has some 14,000 ATMs.

A banker admitted that it does not cost much to operate an ATM, including all the purchase and maintenance expenses.

"If banks are smart and don't set up too many ATMs, they are in for good business," he said. "Large lenders like Agribank and Vietcombank have millions of cardholders with a huge balance surplus that can bring back large profits."

Economist Le Tham Duong said some banks may actually incur losses with the ATM business, as they have claimed.

The problem is there have always been doubts about banks' claims given their lack of transparency, he said.

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