Bank Fees and Small Firms: An Exploratory Evaluation

Abstract

While there is some support for the actions of financial institutions in their apparent shift to charge higher fees, these shifts appear to invoke adverse reactions by customers and extensive debate between opposing advocates. Unfortunately this debate is often not well informed as issues of non lending relationships are not extensively researched and this is especially the case for small businesses. The research reported in this paper is exploratory in nature and focuses on identifying the nature of day to day trading accounts used by small firms in Australia and the cost to business and attitude of owners toward fees and charges on these accounts. Findings indicate that many (40%) small firms do not use major banks and that the majority (63%) do not source borrowings from financial institutions. Bank fees and charges are not a significant cost for most firms but owners do have concerns about the fees and charges levied and other aspects of their relationship with banks.