SA banking complex and pricey, says World Bank

SA banks’ financial products are still too complex for customers to compare and usually come with high fees and unfair terms attached to them, the World Bank reported on Tuesday.

The findings of the World Bank survey, which was commissioned by the Treasury, suggest that SA still has a long way to go before it can reach optimal levels of financial access among low-income households.

According to the World Bank’s development indicators. 69.2% of South Africans have accounts with commercial banks or mobile money operators. Of the poorest 40% of South Africans, only 62% owned such accounts in 2017. This figure is likely to be lower when mobile money accounts are taken out of the equation. Finmark’s financial inclusion report shows that 45% of financial services users were still “thinly served” in 2016, with less than the required number and diversity of financial products to serve their needs.

The World Bank study investigated different product features of transactional and fixeddeposit accounts offered by SA banks to their retail customers.

The findings were particularly disturbing for transactional products designed for low-income customers.

Pricing seemed to predominantly favour electronic transactions, indicating little regard for the fact that this market mainly transacts in cash.

The World Bank survey found that with the current pricing structure, low-income households can end up spending 10% of their income on bank charges when using the two transacting methods with which they are most comfortable — branch and ATM services.

While encouraging lowincome earners to use electronic channels as much as possible may seem like a plausible solution, it ignored the problem of the communication costs, especially for data, the report said.

The government, political parties and civil society have complained of the high cost of data in SA.

The World Bank also identified inconsistencies in the manner in which pricing and product feature information is disclosed and how product regulation is applied.

This study is the latest undertaking in the Treasury’s efforts to regulate SA’s banking sector.