SAN ANSELMO, Calif.-Financial institutions of every stripe will need to look for new products and services to make up for non-interest income that previously was generated from fees on deposit accounts, according to one analysis.
The amount of money banks generated from fees on deposit accounts decreased from $36.2 billion in January of 2011 to $34.1 billion in December of 2011-a decrease of $2.1 billion or 5.8 %, according to analysis from Market Rates Insight.
Since the beginning of the last recession, MRI said income from service fees on deposit accounts dropped from $39.2 billion in December of 2007 to $34.1 billion in December of 2011-a decrease of $5.1 billion or 13%.
Income from service fees on deposit accounts declined despite an increase in the total amount deposited in banks. MRI said total deposits at FDIC-insured institutions increased by $800 billion in 2011-an increase of 8.5%. The increase in total deposits since the beginning of the recession in December of 2007 has been $1.8 trillion, from $8.4 trillion to $10.2 trillion-an increase of 21.4%.
Service fees on deposit accounts include fees related to: the maintenance of deposit accounts such as failure to maintain specified minimum deposit balances, the number of checks drawn on and deposits made to deposit accounts, checks drawn on so-called "no minimum balance" deposit accounts, withdrawals from non-transaction deposit accounts, closing of savings accounts before a specified minimum period of time has elapsed, accounts inactive for extended periods of time or which have become dormant, deposits to or withdrawals from deposit accounts through the use of automated teller machines or remote service units, the processing of checks drawn against insufficient funds, or "NSF check charges" a bank assesses regardless of whether it decides to pay, return, or hold the check, and issuing stop payment orders, certifying checks, and similar services.
"These findings suggest the potential for fee income from traditional services is gradually diminishing," said Dan Geller, EVP at Market Rates Insight. "Institutions need to start offering value-added services that consumers want and need and are willing to pay for."
