ATM fees keep climbing
DETERRENT: NOW IT’S CHEAPER TO GET CASH AT SUPERMARKET TILLS
Banks not only want to steer clients away from tellers, but cash machines, too.
The transformation of bank pricing over the past decade has not just been about the shift from branches to digital channels such as internet banking and mobile apps. There has also been a deliberate shift in pricing to disincentivise the use of cash.
But over time there has been a not-so-subtle shift towards disincentivising customers from drawing cash at ATMs in favour of withdrawing it at supermarket till points. The changes in pricing have been stark. A decade ago, drawing cash at a till point cost from around R1 to R5.20, depending on the account. Charges were higher for the failed Post Office and bank-collaboration Mzansi accounts (R4.50 or R4.70). These fees were not too far from the cost of ATM withdrawals (in some cases, cash at a till was higher).
But, over time, these charges have declined to the point that, for many accounts, the flat rate is R1 per withdrawal (at the higher end, withdrawals at retailers are entirely free, or a reasonable number are). A comparison between the costs of withdrawing cash at an ATM (even the bank’s own) versus a supermarket till point shows just how expensive the former is.
On entry-level transactional accounts, a withdrawal of R1 000 at an ATM will typically cost upwards of R6, while the same withdrawal at a till will cost between R1 and R2. This is the difference between 0.6% and 0.1% in fees. At lower withdrawal amounts, the R6 (or higher) charge becomes material. On mid-level and upper-end bank accounts, most banks offer free withdrawals at till points or their own ATMs up to a certain limit per month (ranging from R2 000 to R10 000, depending on the target segment). Thereafter, withdrawals are generally charged for and getting large amounts of cash from ATMs becomes very expensive. The rate for disbursements is charged per R100, meaning a withdrawal of R1 000 costs R19/R20 at most banks, or 2% of the transaction. Drawing cash at another bank’s ATM is ruinously expensive.
The reasons for these shifts in pricing are simple. Bank executives will admit the cost of cash is very high. These are direct – chiefly the cost of building and operating an ATM network and the security, as well as the costs of transporting and delivering cash.
Given the risks around cash, these costs have increased substantially over time. But as Mastercard’s Cost of Cash study points out, cash has indirect costs too (“travel costs, time-related costs, foregone interest and theft”), but these are mainly borne by consumers. The study also found that cash costs “consumers in South Africa about R23 billion, or 0.52% of GDP, and that poorer communities carried a disproportionate share of these costs”.
Still, retailers benefit from disbursing cash, particularly at the scale at which groups like Shoprite and Pick n Pay operate. They are paid a fixed nominal fee (far less than R1) by banks for these transactions. They attract customers to stores who will generally buy something and the disbursement lowers the amounts of cash they need to process.
Expect fees for cash withdrawals at bank ATMs to continue increasing.
Hilton Tarrant works at YFM