The so-called pricing war currently waging between the banks in South Africa has elicited much debate amongst all stakeholders in this vital financial services segment.
A combination of challenging economic conditions, the recognition of the need to enable fully inclusive banking services, and the entry of a swathe of new banking participants has created something of a 'race for the pricing bottom' between the country's banks, all of which now offer low-, or no-cost bank accounts to their existing and prospective customers.
While arguments in favour of this type of pricing competition quite rightly abound, and there's no denying that competition is an essential requirement for a healthy and sustainable industry, Nedbank's stance is, and has always been, that the real benefits of an affordable bank account have less to do with cost savings and everything to do with its ability to add real and lasting value to the customers who use them.
So, while we are fully committed to ensuring fully inclusive access to banking by offering affordable bank accounts to our clients across all income levels, we are not willing to compromise value.
As such, we deliberately avoid offering bank accounts that are designed to appeal to customers solely on the basis that they are cheap or free.
Our reasoning for this stance rests firmly on our understanding of why bank accounts exist in the first place. Irrespective of where on the income or personal wealth spectrum people find themselves, the main reason they have a bank account is not merely so that their salary can be deposited into it every month.
The vast majority of banking customers want their bank account to help them effectively manage their money. As such, any bank account, irrespective of what it costs (or doesn't) every month, must add quantifiable value to the account holder's life by enabling them to achieve their aspirations and move steadily closer to living the life they desire.
This value-adding requirement has the potential to put a low-cost, or zero-fee, bank account in something of a quandary if it isn't very carefully planned at the outset.
That's because these accounts need to be able to deliver this value sustainably, and indefinitely, without putting such pressure on the bank's margins that it is forced to try and generate income down the line by passing on hidden costs to the customer.
This sustainable value principle underpins all Nedbank's banking offerings, including our low- and no-cost options such as our PAYU, MobiMoney, Stokvel and Unlocked.me accounts.
But it also extends across all our account offerings, and while not all of these are fee-free, they are all designed to maximise customer value, particularly those that offer packaged features and benefits that are designed to meet a range of specific customer requirements that we have identified in our various client segments.
And irrespective of the type, cost, or target markets of our future account offerings, they will all share this same commitment to true value-driven banking.
Our reason for prioritising value over price is simple. We believe that while lower banking costs undoubtedly benefit customers, this feature shouldn’t come at the expense of losing touch with the customer.
Ultimately, a value-driven banking offering requires at least a measure of the personal touch, built on a clear understanding of what the customer needs and insight into his or her typical banking behaviours.
But the risk with zero-fee bank accounts is that, while they initially appeal to customers based purely on the monthly cost savings offered, if they end up being little more than a generic account, with no focus on delivering lasting client value, the affordability aspect could very quickly lose its sheen, and be replaced by client frustration or worse, stagnation.
In the end, inclusive banking should be exactly that, inclusive of the needs and requirements of all members of society, while adding sustainable value.
By Vanesha Palani, Executive: Transactional Products - Nedbank