Last September, the president of the German Association of Savings Banks (DSGV) made a solemn promise: “For our customers, withdrawals at our ATMs are free – and that’s how they’re going to stay.”
Fast forward a few months, and Georg Fahrenschon's promise is null and void. According to a report by consumer website Biallo, some 40 of the country’s 400 savings banks – small, regional retail banks partly owned by local governments – are charging some kind of fee for ATM withdrawals, although usually only for certain kinds of account.
The same is true at cooperative banks, Germany’s other extensive network of small banks. Here, Biallo found that more than 150 of the country’s approximately 1,000 co-operative banks charge for withdrawals under some circumstances.
It is clear that Germany’s culture of free banking is on its way out, replaced by a battery of fees, sometimes designed to fly under customers’ radar.
These offers cannot be sustained in the longer term if banks lack revenue sources. Bafin, Germany's financial regulator
Fees are creeping up across all aspects of banking, with almost all of the country’s ten largest savings banks announcing increases in 2016. One significant change is that banks are increasingly charging for individual transactions, especially branch-based ones, which incur staff costs, and often for online services, too.
In the case of ATM withdrawals, many savings banks allow customers up to five free transactions a month. But some charge every time one of the machines is used.
Responding to sharp criticism from customers and consumer groups, the DSGV has defended its new pricing policy. It says that its member banks offer a variety of account models to customers, allowing them the freedom to choose. As well as flat-rate accounts, many banks offer deals with low basic fees that then charge on a pay-as-you-go basis for transaction charges. The latter model can sometimes involve ATM fees, said the association.
The BVR, a federal association that represents Germany’s co-operative banks, also defended its members' fee structures, telling Handelsblatt that each had its own pricing policy. “For some customers, a decision to opt for a low-cost account model, for example with a monthly limit on free withdrawals, can really be worth it.” Its members have approximately 19,000 ATM machines.
But Frank-Christian Pauli, the financial officer of the Federation of German Consumer Organizations, says ATM fees are just the tip of the iceberg. “Right now, we are seeing massive fee adjustments in a lot of financial institutions,” he said. Fee structuress vary greatly from one bank to another, and across different account models, meaning things are often unclear, he added. “There is a lot of confusion, and the burden is borne by customers.”
Andrea Heyer, of the Consumers Association in the state of Saxony, agreed that a lack of transparency is a problem. “Online price information is hard to find for ordinary consumers, and sometimes completely lacking,” she said.
But account holders are not completely powerless. Achim Tiffe, a Hamburg-based consumer lawyer, said that while E.U. guidelines allow banks to charge fees, they also insist on transparency and fairness. “Particularly on double-charging, it is inevitable that banks will face lawsuits over this,” he said. He added that customers could refuse any new terms and conditions imposed.
Banks have a powerful defender, too, however. Bafin, Germany’s Federal Financial Supervisory Authority, sympathizes with their plight: “Customers may be very fond of no-charge checking accounts, online trading, and credit cards. But these offers cannot be sustained in the longer term if banks lack revenue sources.”
For the banks, increasing fees is a matter of survival. Negative interest rates imposed on wholesale bank deposits by the European Central Bank have upended traditional business models. With checking accounts now a money loser for retail banks, they are forced to raise revenues wherever they can.
Some have already begun imposing negative interest rates on large business customers and some high-net worth individuals, in effect charging them to keep money with the bank. But for the moment, negative interest rates on ordinary customers still seems a taboo too far for the financial industry.
But fee-related changes are still reshaping the industry. Five months ago, Postbank, Germany's largest private retail bank and a subsidiary of Deutsche Bank, abolished most free checking accounts. The bank was among the first to introduce fee-free checking in 1998.
Private banks have a wide variety of fee models. Commerzbank, Germany's second-largest bank, and its subsidiary Comdirect still offer a free checking account, but Hypo-Vereinsbank only does this for customers under 26. Fees range from €2.90 a month to €14.90. Most private banks still offer their customers free ATM withdrawals.
How long that will remain the case is yet to be seen.
Elisabeth Atzler has been a banking correspondent of Handelsblatt since 2012. Frank Drost is a Handelsblatt editor in Berlin, covering financial supervision and banks. To contact the authors: [email protected], [email protected]