Debit card fees

Here's an aspect to explain in part why CBA is so higly valued:

If one assumes around $500 bn in value of debit (not credit !!!) card transaction in Australia annually, then a 1% transaction fee would generate $5 bn in fee income. Of course, CBA does not perform 100% of those transactions, but perhaps 20% of them - being the largest bank in Australia. This would generate $1 bn in transaction fee income.

CBA may not charge 1%, but perhaps 0.9% or 0.89%, therefore getting around $900 m or $890 m annually.

From a banker's point of view, this is a wonderful business for a number of reasons:

• There is no credit risk, as payment is only made when money is in the account.
• CBA has effectively inserted itself into Austalia's GDP creation, and 'creames off' almost 1% annually
• Electronic payments will only ever increase (because: the authorities like it as it reduces the shadow economy and tax evasion, it is easier for customers and businesses alike); therefore CBA enjoys an inbuilt growth driver.

Now, if the banker likes it a lot, then the shareholder of CBA should like it a lot.

Since, I can't ask for 1% percent of the purchase price of sneakers of rumpsteak, then the least I can do is trying to be part of a business that can.

Just my 5 cents worth.

PS. In my humble opinion the above scheme is superior to a mortgage book, where one has to deal with the vagaries of credit risk and housing cycles.