Capitec’s po­si­tion as SA’s most af­ford­able bank un­der threat

Absa, First Na­tional Bank and Stan­dard Bank have be­come far more com­pet­i­tive in the pric­ing of their ac­counts for the low-in­come mar­ket – to the ben­e­fit of you, the con­sumer. Lor­raine Kear­ney re­ports Do rude tell­ers get up your nose?

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

Capitec still reigns supreme as the most af­ford­able bank among mid­dle-in­come earn­ers, but three of its “big four” com­peti­tors are chal­leng­ing its top spot in the low­in­come sec­tor.

This is ac­cord­ing to the sixth Sol­i­dar­ity Bank Charges Re­port, re­leased by the Sol­i­dar­ity Re­search In­sti­tute (SRI) this week. The re­port is an in­terim one, be­cause the in­sti­tute will, from next year, release its re­port in the first half of the year. Be­cause banks re­vise their fees at the be­gin­ning of the year, re­leas­ing the re­port soon af­ter the fees have been re­vised will make it use­ful to con­sumers for longer, it says.

The study cov­ers only the 12 ac­counts or ac­count op­tions the largest five banks mar­ket to peo­ple with low in­comes and the bun­dle ac­counts that are mar­keted to the mid­dle-in­come seg­ment of the mar­ket. It is based on four user pro­files, de­fined by num­ber of trans­ac­tions a month rather than in­come level – 12, 17, 24 and 29. This is be­cause al­most no fees, ex­cept those on cash with­drawals and de­posits at some banks, vary ac­cord­ing to the amount you with­draw or de­posit. In gen­eral, the num­ber of trans­ac­tions in­creases as in­come in­creases, the study says.

The re­port deals only with the bank charges of per­sonal trans­ac­tional ac­counts and doesn’t take into ac­count credit fa­cil­i­ties such as credit cards and over­drafts.

Capitec’s Global One ac­count is no longer the clear win­ner on fees in ac­counts mar­keted to low-in­come earn­ers, the study has found. First Na­tional Bank’s (FNB’s) EasyAc­count and Absa’s Trans­act are com­pet­ing well, and Stan­dard Bank’s Ac­cessAc­count on the pay-as-youtrans­act op­tion is not far be­hind.

In the mid­dle-in­come mar­ket, Capitec is still much cheaper than the other banks, even for clients who do many trans­ac­tions a month. When the in­ter­est Capitec pays on ac­count bal­ances is fac­tored in, this gap in­creases.

LOW-IN­COME MAR­KET

While none of the five banks made big changes to the struc­ture of their ac­counts mar­keted to low-in­come earn­ers, there were sig­nif­i­cant changes to the lev­els of fees.

Ag­gres­sive com­pe­ti­tion from FNB’s EasyAc­count and Stan­dard Bank’s Ac­cessAc­count have given Capitec’s Global One ac­count a run for its money. Absa’s Trans­act is also com­pet­i­tive, even though its fees in­creased slightly, but Ned­bank’s Ke Yona ac­counts are still far and away the most ex­pen­sive, de­spite a drop in some fees.

Capitec slightly in­creased its fees for with­draw­ing cash, but pay­ing in­ter­est on the bal­ances in its clients’ ac­counts keeps its over­all costs com­pet­i­tive.

For ex­am­ple, on the 12 trans­ac­tions pro­file, FNB’s EasyAc­count is the cheap­est at R17.25 a month, fol­lowed by Absa’s Trans­act at R24.25 and Stan­dard Bank’s Ac­cessAc­count on the pay-as-you-trans­act op­tion at R25.20. Capitec comes in fourth most ex­pen­sive at R31.90 a month, and Ned­bank fifth.

But if the in­ter­est paid on the bal­ance in the Capitec ac­count is fac­tored in, this changes. A Capitec client with an av­er­age bal­ance of R5 000 through­out the month, for ex­am­ple, will, at a rate of 4.5 per­cent, re­ceive in­ter­est of R18.37, off­set­ting most of the charges, making Capitec’s the cheap­est ac­count, with a net cost of R13.53.

On the next pro­file, 17 trans­ac­tions a month, Capitec drops to sec­ond place be­hind FNB, even fac­tor­ing in the R18.37 in­ter­est on the av­er­age bal­ance on R5 000.

FNB made two key changes on its EasyAc­count – the fee for an in­ter­nal debit or­der de­creased from R1.50 to zero and the fee for an in­ter­net pay­ment (elec­tronic funds trans­fer or EFT) de­creased from R3.20 to R1.50. But FNB in­creased other fees, such as fees for ATM with­drawals and ex­ter­nal debit or­ders.

FNB’s sav­ings pocket earns in­ter­est at a rate of 4.75 per­cent on bal­ances be­low R20 000 on its EasyAc­count – this is not the case with the sav­ings pock­ets on its other ac­counts – and the rate drops on bal­ances over R20 000. But it does re­quire you to move money out of your trans­ac­tional ac­count and into the sav­ings pocket, which is more oner­ous than Capitec’s blan­ket in­ter­est on your bal­ance.

In ad­di­tion, FNB does not charge fixed fees for ATM with­drawals – Capitec and Trans­act do – and its fees es­ca­late quickly as the amount of money with­drawn in­creases. This can raise the fees on the ac­count sig­nif­i­cantly over the month.

“Some of the ac­counts, such as Stan­dard Bank’s Ac­cessAc­count on the Plus op­tion and all three op­tions of Ned­bank’s Ke Yona ac­count, were not com­pet­i­tive in terms of cost at all,” the SRI re­port says.

How­ever, the Ac­cessAc­count on the pay-asyou-trans­act op­tion com­petes much bet­ter this year fol­low­ing the de­ci­sion by Stan­dard Bank to scrap all fees on cash with­drawals at till points and for in­ter­net pay­ments, in­ter­nal debit or­ders and stop or­ders. SRI points out that while it is not the cheap­est ac­count, the con­ve­nience of the thou­sands of Ac­cessPoints across the coun­try may “off­set this slight ex­cess cost for many clients”.

The only bank buck­ing the trend to­wards cheaper bank­ing in this seg­ment of the mar­ket is Ned­bank. It has re­moved the sub­scrip­tion fees for SMS up­dates and in­ter­net bank­ing on the pay-as-you-trans­act op­tion, “but even so, there does not ap­pear to be any rea­son why some­one in­ter­ested in saving on bank charges would choose any Ke Yona ac­count over an ac­count from one of the four com­peti­tors,” the re­port says.

MID­DLE-IN­COME MAR­KET

In the mid­dle-in­come mar­ket, the trend among the Big Four is still to­wards drop­ping pay-as-you-trans­act op­tions, and this year FNB scrapped the pay- as- you- trans­act op­tion on its Gold ac­count en­tirely.

On ac­counts from Absa, Stan­dard and Ned­bank, it does not make fi­nan­cial sense to pick the payas- you- trans­act op­tion over the bun­dle op­tion.

Even on the 12-trans­ac­tion pro­file, Absa’s Gold pay-as-you-trans­act and Ned­bank’s Savvy pay-as-youtrans­act op­tions are more ex­pen­sive than their bun­dle op­tions; Stan­dard’s Elite pay- as- you- trans­act op­tion is marginally cheaper than its bun­dle op­tion. On all the other trans­ac­tion pro­files, the pay-as-youtrans­act ac­counts from th­ese three banks are sig­nif­i­cantly more ex­pen­sive than their bun­dle coun­ter­parts.

In this mar­ket seg­ment, Capitec’s Global One is by far the cheap­est ac­count, even be­fore tak­ing in­ter­est into ac­count. On 12 trans­ac­tions a month, a user pays R31.90 a month. If the user has an av­er­age bal­ance of R10 000, the ac­count earns in­ter­est of R36.75, off­set­ting the fees en­tirely. Be­cause it is a pay-as-you-trans­act ac­count, the fees go up the more trans­ac­tions you do, but even at 29 trans­ac­tions a month, at a cost of R80.50 (be­fore in­ter­est is paid on the bal­ance) this is a cheaper ac­count than its com­peti­tors.

The bun­dle-op­tion fees of the ac­counts at the other four banks are only marginally dif­fer­ent: What would frus­trate you enough to switch banks? Most re­spon­dents in a global sur­vey said it was not ben­e­fits or lower bank charges that would make them move, but rude or un­in­ter­ested staff. A re­cent cus­tomer loy­alty study com­mis­sioned by New York-based an­a­lyt­ics com­pany Verint Sys­tems found that only 24 per­cent of the 18 000 peo­ple sur­veyed in nine coun­tries in­di­cated that their bank de­liv­ered good ser­vice. And when they were asked what would pro­voke them to switch banks, there were two lead­ing rea­sons: “im­po­lite, rude or un­in­ter­ested staff” and “too many mis­takes”, both with 22 per­cent.

In South Africa, cus­tomer ser­vice and price were par­tic­u­larly im­por­tant for con­sumers; im­po­lite or un­in­ter­ested staff (23 per­cent) was seen as more im­por­tant than find­ing a cheaper al­ter­na­tive (19 per­cent) as a rea­son for switch­ing banks. Con­sumers in the United King­dom were even more op­posed to bad ser­vice, with 28 per­cent say­ing they would change banks be­cause of im­po­lite or un­in­ter­ested staff and 25 per­cent be­cause of too many mis­takes.

Get­ting it right is crit­i­cal, Jenni Paloc­sik, the di­rec­tor of so­lu­tions mar­ket­ing for Verint Sys­tems, says. She says that, done well, branches can be trans­formed to give banks a com­pet­i­tive ad­van­tage. – Staff Re­porter ◆ Stan­dard Bank Elite Plus: R95 ◆ Absa Gold Value Bun­dle: R98 ◆ Ned­bank Savvy Plus: R99 ◆ FNB Gold Cheque Un­lim­ited: R100

Here, your de­ci­sion on which ac­count to choose would be in­flu­enced more by what is in­cluded and ex­cluded from the bun­dle as well as any ex­tras, such as re­wards, but SRI does not do a full anal­y­sis of the re­wards pro­grammes. In­stead, it advises you to make sure you know what the re­wards are.

Some trans­ac­tions fall out­side the bun­dles for th­ese ac­counts, but in the trans­ac­tional pro­files it uses, the study finds that the only reg­u­lar fees that in­crease the costs of th­ese ac­counts above the nom­i­nal monthly fees are those for trans­ac­tion no­ti­fi­ca­tions to third par­ties – specif­i­cally pay­ment no­ti­fi­ca­tions via SMS to ben­e­fi­cia­ries of an elec­tronic funds trans­fer. Th­ese are: ◆ Ned­bank: free ◆ Absa: 80c ◆ Stan­dard: R1.00 ◆ FNB: R1.15 Ned­bank charges R4 for a cash with­drawal at a till point, while the oth­ers charge noth­ing.

“Al­though the cost dif­fer­ences among the bun­dle ac­counts are min­i­mal, there is still strong com­pe­ti­tion among the banks at this level,” Paul Joubert, the se­nior re­searcher at the SRI, says. “For ex­am­ple, where Stan­dard Bank’s elite Plus ac­count last year was gen­er­ally the most ex­pen­sive in this group, this year it is mostly the cheap­est af­ter Capitec. This year, FNB’s Gold Un­lim­ited ac­count is the most ex­pen­sive of the bun­dle ac­counts.” (See ta­ble, left, for the rank­ings for the mid­dle- in­come ac­counts).

The cost dif­fer­ences be­tween th­ese ac­counts are so small, cus­tomers will look for value else­where, SRI says. This could be some­thing as sim­ple as the lo­ca­tion of branches or the friend­li­ness of staff at a spe­cific branch, but as elec­tronic bank­ing be­comes more pop­u­lar, this be­comes less im­por­tant.

Banks also at­tract clients through prod­uct syn­er­gies that re­sult in lower fees, the re­port says. Ex­am­ples are a dis­counted ac­count for your spouse if you have Stan­dard’s Elite Plus ac­count, or lower fees on an Absa Value Bun­dle if you have an Absa credit card.

And then there are bank re­wards pro­grammes. Absa has its Cash Re­wards, FNB has eBucks, Ned­bank has Green­backs, and Stan­dard has Ucount. Th­ese ap­pear to be more im­por­tant in mar­ket­ing than the mar­ginal cost dif­fer­ences be­tween the ac­counts.

Ac­cess to FNB’s eBucks is free on the mid­dle-in­come bun­dle ac­counts; Ned­bank charges R17 a month for ac­cess to Green­backs, Stan­dard R20 a month for Ucount, and Absa R21 a month for Cash Re­wards.

But the re­quire­ments for earn­ing re­wards and the ways to re­deem them dif­fer con­sid­er­ably.

“Clients in­ter­ested in th­ese re­wards pro­grammes should do their home­work prop­erly be­fore de­cid­ing which bank to sup­port,” Joubert says. “They should also take note of the fact that the terms and con­di­tions of th­ese pro­grammes can change of­ten.”

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