There is something wrong with paying $4 to withdraw $20 from an ATM. This has nothing to do with the cost of the operation: it is a practice that is only possible because of the high concentration of the banking sector in Canada.
According to an ING Direct study, Canadians pay, on average, more than $200 per year in everyday banking fees, in addition to the tens of thousands of dollars that some pay in interest on their mortgages, personal loans and credit cards.
A report from North Economics compared Canada to Australia and Great Britain and concluded that Canadians pay $7.7 billion in “excess” fees each year.
“Canadian banks have done a very good job of extracting as many fees as possible from people,” writes the report’s author, Alain de Bossart.
Despite the record profits announced by financial institutions since the pandemic, bank fees have not fallen. On the contrary, they have continued to increase, by almost 15% in 2023 and by more than 20% for two years.
“Inflation”, you understand.
But what inflation exactly?
- Listen to the Gosselin-Dumont meeting with Francis Gosselin via QUB :
Pure profit
Today, when the majority of everyday transactions are digital, the “marginal” cost of a simple banking transaction is zero.
Of course, banks have to pay for office space, salaries and many other operating costs. But the rapid increase in the policy rate, which took mortgage rates well above 5%, was not offset by an increase in interest on savings. As their most recent financial results have demonstrated, bank profits are exploding, and fees… are exploding too.
The banks therefore grease their paws on both sides, without real compensation for the economy or for their customers.
This harkens back to the days when telecom companies charged their customers $0.10 to send a text message.
A real farce.
Photo Martin Chevalier
Legitimate renters
Banks play an absolutely crucial role in the economy of Quebec and Canada. For those who manage to save, banks provide investment opportunities that make old earnings grow. For others, who wish to finance their house, their car, their household appliances or their business projects, the bank today provides the missing dollars, with interest of course.
The problem is that this reallocation of dollars between holders and requesters, while necessary, does not create anything. In economics, we call this an annuity: a capture of wealth linked to a privileged position as an intermediary, without taking risk or creating additional value.
Each time financial institutions grow faster than GDP, this means that this economy of rentiers “takes” from the economy of wealth to the detriment of real activities.
We would not imagine an economy made up of 100% financial institutions; there would be no one left to “do” anything.
We must therefore remain very attentive to this capture of wealth by a very small group of privileged institutions – the banks –, otherwise at the risk of stifling the real engines of our economy.