Fighting off the newbies

Nedbank has three no-fee accounts in its armoury as it prepares to do battle against rivals such as Tymebank

It’s game on. Nedbank donned gloves in the banking price war with the announcement that it is dropping the monthly account fee on its pay-as-you-use (PAYU) account.

The bank, according to statistics from Genesis Financial News & Data, holds the lowest market share among the big four in terms of deposits, loans and advances. Earlier this month it launched another zero-fee digital product aimed at customers younger than 25, called Unlocked.me.

The latest development takes zero-monthly fee transactional products offered by the bank to three. In November last year it launched a nofee mobile wallet account, Mobimoney.

However, scrapping fees on an existing product is arguably the most aggressive move by the green bank so far.

Nedbank’s head of card, payments and transactional products, Vanesha Palani, says the bank is simply responding to tough times facing consumers and thought it would lighten their load by bringing “accessible, affordable banking solutions”.

“We are hoping to make things easier for our clients,” she says. “Our commitment to financial inclusion remains absolute.”

Nedbank is the second of the established banks to cut fees on existing transactional products in the face of rising competition by new players such as Tymebank, whose biggest selling point is zero fees. In March Capitec decreased the monthly admin fee on its Global One account from R5.75 to R5. It reduced a host of other fees, but increased a few others, including in-branch transfers.

Palani says that while a large percentage of Nedbank’s customer base has bundled banking products, more people are taking up the PAYU offering as well.

She says the account has recorded strong growth year on year. It is popular, she says, with people who use the account mainly for purchases, as it offers free card swipes. The PAYU accounts are not confined to entry-level customers — customers across all segments are taking up this product.

When Nedbank launched Unlocked.me, analysts said it was targeted at a small base of clients as a defensive strategy.

Doubt lingered as to whether the bank could roll out a zero-fee account to more customers, as traditional banks have revenues to protect.

Though Nedbank did not say how much of its transactional revenues it will forgo by scrapping PAYU monthly admin fees, banking analyst at Avior Capital Markets Harry Botha says that even if a big share of Nedbank’s customers hold these accounts, the bank would still sacrifice less in transactional income when one considers the upside potential.

“Let’s assume Nedbank has 5-million customers. At R5.50 (including VAT) the fee cut will reduce Nedbank’s Group revenues by about R287m or 0.5%. It’s not significant. I think Nedbank hopes to recoup the fee reduction by attracting more customers,” he says.

Nedbank’s fee structure is now similar to Tymebank’s but Nedbank’s distribution channels and overall product capabilities are much more advanced Harry Botha