Data shows dramatic slowdown in economy
BANKING charges are becoming more affordable to customers due to stiff competition by South African banks, according to the seventh bank charges report by Solidarity Research Institute (SRI).
The report analyses transactional accounts from banks, including Absa, Nedbank, Standard Bank, Capitec and First National Bank (FNB).
Paul Joubert, a senior researcher at SRI, said that as a result of strong competition in the basic bank account market, all four major South African banks were keeping the cost of these accounts relatively low, as was the case last year.
Competition
Joubert said: “Unlike in the past, Nedbank, with its new pay-as-you-use account, now also competes well with the cheaper accounts offered by Capitec, Absa, FNB and Standard Bank. Therefore, all Capitec’s big competitors are now imitating Capitec’s lowcost account model.”
But when it came to middle-income banking clients, Joubert said the lower cost of bundle accounts had the effect of pushing pay-as-youtransact (PAYT) accounts out of the market.
“In the past three years, the phasing out of PAYT accounts have been a remarkable phenomenon. Nedbank and FNB have already stopped marketing PAYT accounts to the middle class entirely.”
With regard to the bundled accounts marketed to the middle class, little has changed, with all of them costing about R100 a month, Solidarity found.
He said that for middle-class accounts after Capitec’s account, Standard Bank’s Elite Plus account remained the cheapest in this category.
Francois Viviers, an executive for marketing and corporate affairs at Capitec, said their approach had never been to segment the market according to income or any other measure.
“Why should a professional person pay more in bank fees, or a low-income earner or student receive a lower level of
‘Why should a professional pay more in bank fees, or a low-income earner receive a lower level of service?’
service? This is a traditional approach to banking and in our view it is not in the client’s best interest,” Viviers said.
Viviers said Capitec had developed its Global One savings plan solution to offer the best value for money and good service to all South Africans, no matter how much they earned.
Viviers said competition with other banks was healthy and good for consumers. “We keep a close eye on our competitors and take them very seriously. We look at our clients and determine what they really need from the bank, and we use that insight to maintain a pioneering banking offer.”
Reward programmes were increasingly influencing clients’ choice of a bank, according to Joubert. “However, it seems as if most banks are curtailing their rewards programmes, for instance by making it more difficult to reach a high level of earnings in the programmes. Therefore, clients interested in these rewards programmes should be aware of the fact that the terms and conditions of these programmes could change often.” JULY’S BankservAfrica Economic Transaction index (Beti) showed South Africa’s economic activity was “dramatically slowing again” and the quarterly drop in interbank transactions had the biggest decline in 18 months.
The Beti is a measure of all South African interbank transactions under R5 million.
South Africa is battling with slowing growth – which the Reserve Bank forecast 0 percent growth this year – with increased levels of households under financial strain and high levels of unemployment.
Economic transactions declined significantly in July, recording a real value fall of minus 0.2 percent on a year-onyear basis, according to Beti, released yesterday. This was also the most significant fall on every measure and for all usual periods for the Beti.
“This data shows there is a broader slowdown among all of the country’s main economic sectors at present,” said Mike Schüssler, the chief economist at Economists.co.za.
While gross domestic product (GDP) showed that the large drop in mining caused the economic decline in the first quarter, the Beti now indicated a broader economic slowdown in the third quarter after a more positive second quarter, he said.
“The quarterly and monthly levels also declined by minus 3 percent and minus 1.2 percent, respectively. July seems to have been a particularly weak month with economic transactional activity closely aligned with January and May’s low figures,” said Caroline Belrose, the head of fraud and data analytics at BankservAfrica.
The report said: “Electronic credit transfers via electronic funds transfer did not show any nominal growth at all, while normal debit orders were down.”
Schüssler said: “The higher interest rates and slow economic growth is slowing consumer spending, which will, in all likelihood, continue in the short-term.”
Only real time via electronic clearing showed a meaningful increase. However, this could be the result of the general shift away from cheque-based transactions.
The volume of transactions going through the payment system via BankservAfrica slid by minus 1.2 percent, Belrose said. The total nominal value before standardisation also showed a decline. The standardised value of the Beti was R749 billion.
While the second quarter GDP growth was likely to be far more positive than the negative first quarter figures, the data suggested that the economy