The bank fees debate in Mexico: an opportunity to incentivize digital channels
A bill recently presented by Mexican Senator Ricardo Monreal banning some bank fees has been the topic of debate, creating a space for bankers and the government to discuss the topic. In the article “Are bank fees high in Mexico?” published in the newspaper El Financiero, BBVA Bancomer Chief Economist Carlos Serrano Herrera presents information to keep in mind in order to reach some common ground on the issue.
When considering whether or not bank fees are high in the country, Serrano explains that analysis of the price of a good or service depends on the result of a competitive process, and whether efficiency gains are obtained that would reduce their cost in the future. Therefore, in order to determine whether fees are high, the cost must be compared over time with those in other countries.
In terms of the fees over time, the economist points out that the fees banks charge are not high and have been consistently declining in recent years. In 2005, fees comprised 45% of banks’ operating revenues, but dropped to 17% in September 2018. “This is a considerable reduction that did not happen by accident, rather through a series of regulatory changes that promoted greater competition and the efforts of the Bank of Mexico, tasked with regulating this matter,” he indicates.
When comparing bank fees in Mexico to international fees, Serrano notes that they are not higher in Mexico than in other countries. “Fees as a proportion of income are lower in Mexico than in developed countries like Germany, France and the U.S., and also lower than those in developing countries like Chile, Colombia and India. Looking at a large group of countries, Mexico is in the middle of the table.”
And in terms of what each individual customer is charged, Mexico does not have high fees. For example, an individual sending a bank transfer through the Interbank Electronic Payment System (SPEI) is charged eight pesos — less than five pesos in most banks. Meanwhile, the same transfer in the U.S. would cost $20, the equivalent of 400 pesos, for both the person sending and the person receiving the money. This is 50 times more expensive than in Mexico.
Serrano believes that the fact that bank fees continue to decline is a good thing, but banning fees all together is not the best way to achieve this, as controlling the prices creates supply constraints. In order for bank fees to continue decreasing, greater efficiency gains are needed. Technology plays a fundamental role in this, as “it has substantially lower costs”. Therefore, continuing to charge fees for physical infrastructure incentivizes the use of digital channels.