Li Yan hesitated for a moment as she passed her closest ATM an Industrial and Commercial Bank of China (ICBC) one, just a two-minute walk from her office.

 

Previously Li would have had no qualms about marching up to it to check her China Construction Bank (CCB) account balance. But as of June 1 she will be charged 0.3 yuan (3.8 US cents) for that check.

 

"Although the trans-bank information enquiry fee is not a big amount, I will still think twice when I check my account," Li told China Daily. Eventually she made the 10-minute walk to the nearest CCB ATM where she can check her account free of charge.

 

From June 1, the Big Four banks the ICBC, CCB, Bank of China (BOC) and the Agricultural Bank of China (ABC) will charge holders of other bankcards the fee of 0.3 yuan (3.8 US cents) for checking accounts at their ATMs. Bank of Communications (BoCom), the fifth-largest lender in the country, was the first to announce the trans-bank ATM fee on May 9, also effective June 1.

 

Some joint-stock banks are following suit with minor adjustments. The Shenzhen Development Bank has introduced a charge of 0.2 yuan (2.5 US cents) for each trans-bank information enquiry. Other banks say they will hold off charging for this service for the moment.

 

Analysts said that smaller banks, which are struggling for a bigger market share, may foot the bill on behalf of cardholders.

 

"China UnionPay, the Shanghai-based operator of the country's integrated system for bankcard payments, will charge fees on bankcard issuers for sure. But that doesn't mean all the banks will transfer these charges to cardholders," said Dong Chen, an analyst with China CITIC Securities.

 

"Smaller banks have a limited network and ATMs, making it inconvenient for their cardholders to draw deposits or check accounts. Therefore, to win more customers, those banks will charge less or even free their cardholders from those fees," Dong added.

 

According to Liu Yongchun, the vice-president of China UnionPay, the cost of a trans-bank information enquiry hovers around 1 yuan (12.5 US cents). In that case, consumers only absorb part of the cost. Of the 0.3-yuan charge, UnionPay, the bankcard issuer and the processing bank will receive 0.1 yuan respectively.

 

Statistics from the central bank show that 175 institutions issued 960 million bankcards by the end of 2005, of which 550 million bankcards are from UnionPay. If cardholders check their accounts at other banks' ATMs once a month, they would pay 1.98 billion yuan (US$247 million). UnionPay and banks will get 660 million yuan (US$82.5 million) and 1.32 billion yuan (US$165 million) respectively.

 

"It is understandable to have to pay some money for certain financial services, but the service quality should also be improved," said Yang Yang, a 35-year-old white-collar worker.

 

She said she was annoyed by UnionPay's nine-hour network breakdown in April.

 

"If the convenience provided by the bankcard payment network has a price-tag, the inconvenience caused by its failure should also be compensated," Yang complained. "Only when the charge for a service is combined with the remedy for a disservice can a company's promise of quality service equate to more than just lip service."

 

From June 2003, when pilot regulations on the service price management of commercial banks were released, over 20 types of services began to charge fees. And there are more to come.

 

China UnionPay is set to charge its member banks a "brand management fee" worth 0.02 percent of the trans-banks deal value. Meanwhile, the Guangdong branches of the ABC and CCB have also raised their cash withdrawal fees at trans-bank ATMs from 2 yuan (25 US cents) to 4 yuan (50 US cents).

 

Yin Jianfeng, a researcher with the Chinese Academy of Social Sciences, believes that banks are taking advantage of their monopoly status to charge more fees, leaving customers with no other choice.

 

"The monopoly will make customers finally choose those big banks with higher prestige, and thus increase their market shares and squeeze out smaller players. Therefore, big banks will become even bigger and have a larger say, resulting in more monopoly in the sector," Yin says.

 

According to Zhou Xiaozhen, a professor with Renmin University, banks should not transfer the pressure of profit to customers.

 

Chinese banks have been frustrated by the huge amount of non-performing loans (NPLs) for a long time.

 

Sour loans racked up by major Chinese banks by the end of March totalled 1.21 trillion yuan (US$150.5 billion), according to statistics from the China Banking Regulatory Commission.

 

"The big loss is mainly due to banks' unsound corporate governance and risk management schemes. Hence, they should take more efforts to strengthen their management rather than charge more fees on common depositors," Zhou said.

 

(China Daily June 7, 2006)