THE BANK NO-ONE SAW COMING

A new report into bank fees shows that Capitec is the cheapest bank by miles — and some of its competitors have tried to copy what it’s doing

Afew weeks before the financial crisis hit banks across the world in 2008, Judge Thabani Jali released a much-awaited report into whether SA’S banks were competing with each other as hard as they claimed. It would be fair to say the findings of Jali’s panel, which heard testimony from banks and civil society groups for months at the competition tribunal, were not exactly popular in banks’ boardrooms.

Specifically this assessment: “[Banks] in SA operate not as a cartel but rather as oligopolists that maximise their profits by avoiding outright price competition where they can, and by taking advantage of the degree to which customers, once recruited, become locked into a particular bank.”

Jali’s report talked of how the market for personal transactional accounts was “highly concentrated” within the big four banks, with “barriers to entry by additional firms” being high. Nor did he hold out much hope of change. “Fringe players”, such as Capitec, hadn’t “posed a serious competitive threat to the big four banks”, the report concluded. So Jali’s panel published 28 recommendations (such as slashing penalty fees on debit orders to R5 and making fees more transparent) to reform bank costs.

But then talk of reform was quietly shelved.

There were reasons for this. For one thing, some banks had preempted Jali’s findings by implementing some of the recommendations. More critically, within weeks, Lehman Brothers’ collapse had pushed global banks to the brink — and the last thing regulators wanted was even a smidgeon of risk for SA’S banks.

In 2004, Capitec had fewer than 400,000 bank accounts. Today it has more than 9m and is the secondlargest retail bank in SA