Hiroshi Oka, Senior Fellow
As the monetary easing policy by the Bank of Japan has been extended, the net operating profit of Japanese banks in the fiscal year ended March 31, 2018 has declined to the lowest level in the past 20 years. Even if the interest rate policy was normalized, it is unlikely that interest rate competition among financial institutions over the subdued level of financing demand will calm down as the population declines, and profitability improvement cannot be expected. In order for domestic financial institutions to maintain stable management in the future, it remains necessary to redefine the business model through structural reform.
One of the pillars of a structural reform is a review of the fee structure and the introduction of account maintenance fees. In particular, account maintenance fees have the advantage of stabilizing banking revenues and expanding profits to a certain extent. They also help to secure resources towards enhancing FinTech and cashless services that are expected in the future.
However, until now, the level of recognition of account maintenance fees in Japan has been low, and it was considered difficult to introduce them due to strong resistance from bank customers. Therefore, we recently conducted a nationwide survey with 3,144 respondents. As expected, the percentage of "acceptance" has remained at only a few percent, however, the proportion of "conditional acceptance" accounts for about 50%, and when "acceptance" and "conditional acceptance" are combined, they exceed "opposition". From this survey result, it can be assumed that even in Japan there is a certain degree of feasibility to introduce account maintenance fees. The introduction of account maintenance fees has many challenges. A careful explanation and a step-by-step approach over time are necessary when introducing account maintenance fees.
In addition, when account maintenance fees are introduced, banking transactions are expected to be aggregated to main accounts, thus changing the competitive landscape of financial institutions. Business operations, such as marketing, will also be affected. In this way, the introduction of account maintenance fees should be regarded as a restructuring that will lead not only to measures to improve earnings but also to a reinvention of the business model.
The full version of this report is available in PDF format below. This report is only available in Japanese.
Feasibility of Introducing Account Maintenance Fees as Part of Restructuring the Japanese Banking Business Model