Innovation spurs banking transactions growth to the fastest rate in two years
CAPE TOWN – Innovation in banking is driving up transaction activity, according to the BankservAfrica Economic Transaction Index (BETI) for January 2020.
The BETI in January reached 123.4 and grew by 3.7 percent in real, annual terms. Growth from the last quarter was 2.6 percent after a 2.3 percent quarterly growth in December. The monthly change, however, was 0.4 percent in real terms.
Head of stakeholder engagements at BankservAfrica Shergeran Naidoo said rapid transformations in banking in South Africa were benefitting customers who were at the receiving end of the improved experience and lower fees. “This is evident in the current data that shows a pick up in transaction activity.”
Chief economist at economists.co.za Mike Schüssler said at first glance, the data did not sync with the economic reality.
He said on an annual basis, it could also reflect the low base of the first quarter in 2019 when the BETI reached a two-year low. However, on closer inspection, it is telling of the interbank activity that has created some disruption in the world of transactions.
The latest BETI reflects the new interbank behavioural changes from the fast-changing world of banking, which also extends into immediate payments, according to Naidoo.
The BETI found that South African consumers were choosing to take the Real-time Clearing (RTC) payments route. This service allows a payment to be reflected immediately in the recipient’s bank account.
“The growth for this was 36.3 percent in nominal terms in value and 61.3 percent for the number of transactions. In the two years since January 2018, the number of RTC transactions has grown from 1.9 billion to 4.8 billion. This represents a 151 percent increase,” says Naidoo.
Banks have also made it easier for customers to open first and second bank accounts. It has also become easier for customers to open accounts at two different banks, while bank fees are lower and the rewards for owning and maintaining these are higher.
More previously unbanked individuals are entering the banking market and making use of bank services both via card and mobile apps, according to the BETI.
“As more bank customers open an account with another institution to get rewarded for doing so, and as transaction fees decrease, the transfer of money from an established account to a new account is occurring more frequently.
“In effect the same money is counted twice, as the money is used for an economic transaction and again when it is transferred between two different bank accounts for the same customer,” said Schüssler.
As such, this has created incongruencies in the current BETI data for reflecting the present strength of the SA economy.
Another factor is that most banks are encouraging transactions via the banking apps that they have and many payments are moving away from point-of-sale systems to transactions between sellers and buyers via direct EFTs.
Digital transactions – excluding salary and social grant payments – have grown 9 percent in volume terms but only 5.5 percent in value terms. This indicates that electronic transfers from banking clients are being used for much smaller transactions.