Game on, as fees are cut
CAPITEC’S NEW MOVE MAKES IT TOPS IN LOW-COST BANKING But charges for many cash transactions soar.
Capitec Bank has cut the monthly pricing of its Global One account by 14% to R5, making it a lot more competitive in the entry-level banking segment. While it has led the way in low-cost banking, in recent years Capitec has been bested by Old Mutual’s Money Account (at R4.50 per month) and new entrant TymeBank, which charges no monthly fee. The strategy is clear: it does not want to give (ultra) price-sensitive customers any reason to shop around.
It has also cut the fees for electronic payments made on its mobile app or internet banking by 38% to just R1. Immediate electronic payments to other banks will be 20% cheaper, at R8. Debit order costs are down 6% to R3.50 each. All pricing is effective 1 March. Last year, Capitec (like some other banks) passed two price increases: the annual change as well as an adjustment from 1 April to account for the increase in VAT to 15%.
But, while cash withdrawal fees at major supermarkets – Pick n Pay, Boxer, Shoprite and Checkers – are also down by 38% to R1, there are potentially sharp increases in the cost of withdrawing from ATMs. Capitec currently charges a fixed fee for ATM withdrawals: R6.56 at its own network and R8.83 at those of other banks. From March, it will change the structure of its pricing to charge a fee per R1 000 withdrawal.
From March, the cost of drawing R1 000 (or less) will drop by 9% to R6 at Capitec ATMs and R8 at other ATMs. But, draw over this amount and the charge will nearly double (up to R2 000), or more than double above that amount. Capitec may argue that the majority of its customers draw R1 000 or less per ATM visit, and this may be true. But, there’s no escaping the increased cost for banks to handle cash. It is for this reason that withdrawing cash at tills is significantly cheaper, if not free. Banks would far prefer customers withdraw in that environment. Retailers also prefer this route as it attracts customers to stores as well as, importantly, helps them offload cash.
There are increases for cash deposits too: a modest 4% for cash-accepting ATMs (R1 per R100) and 21% for branch deposits (R2.75 per R100).
It is doubtful Absa, Nedbank, Old Mutual Bank or Standard Bank will react at all to Capitec’s pricing, considering their changes took effect on 1 January. FNB’s annual pricing review is from July each year, and one wonders to what extent this move by Capitec will alter its plans in the entry-level Easy segment. TymeBank’s value proposition – no monthly fee – is a strong selling point, so expect no changes there. Bank Zero is expected to make its debut before mid-year and will compete on fees.
Earlier this month, Capitec Bank said it had experienced its “highest single-month uptake to date, with over 266 000 new clients joining the bank in January 2019”. Its recent run-rate has been an addition of over 100 000 net clients per month (not directly comparable to the January 2019 figure, as that is not net). For the six months to 31 August, Capitec reported a 15% increase in active clients to 10.52 million. It will report annual results on 28 March.
Hilton Tarrant works at YFM