The cost structures of most banks are “reasonably in line” with one another, competing more by means of added value such as rewards programmes, which have been substantially expanded over the past number of years. Picture: Simphiwe Mbokazi/African News Agency (ANA) Archives
The cost structures of most banks are “reasonably in line” with one another, competing more by means of added value such as rewards programmes, which have been substantially expanded over the past number of years. Picture: Simphiwe Mbokazi/African News Agency (ANA) Archives

Consumer Watch: Do you know what you’re paying for in bank fees?

By Georgina Crouth Time of article published Feb 15, 2021

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Cape Town - A growing number of consumers are starting to pay attention to transactional banking charges, thanks to the meteoric rise of entry-level products such as TymeBank, FNB Easy Zero, Nedbank MobiMoney and African Bank’s MyWORLD which attract low or ultra-low fees.

In its 11th bank charges report, released this month for the year 2020 due to upheavals related to Covid-19, trade union Solidarity once again gives consumers an overview of transaction account charges with the major banks.

The report focuses on the big five banks – Absa, FNB, Standard Bank, Nedbank and Capitec.

The union said that since publication of its first bank charges report in 2010, it had noted increasing competition by banks to remain competitive. The cost structures of most banks are “reasonably in line” with one another, competing more via added value such as rewards programmes.

Youth, student, those aimed at the elderly, specific faith groups and private bank accounts are not covered in the report. It does not include accounts specifying minimum or maximum monthly income, unless it is the only one in the category offered by a specific bank. Some accounts that do not offer full banking services, such as not allowing debit orders, have been excluded. Credit costs – in the form of credit cards, overdraft facilities, vehicle financing, home loans and personal loans – are also not covered.

’Impossible to compete on costs’

Theuns du Buisson, economic researcher at the Solidarity Research Institute, said: “Banks have started to focus on their rewards programmes because it has become all but impossible to compete on costs. For this reason, we are focusing much more on rewards programmes this year, comparing them for the first time according to a fixed list of transactions.”

Solidarity said Capitec remains the cheapest “by far” if interest was not taken into account, but it does not offer an extensive rewards programme.

For all banks, especially FNB, withdrawing cash at a retail counter remains cheaper than doing so from the banks’ ATMS and counters – and banks are encouraging customers to conduct their banking online.

“In the entry-level category, Absa Transact… is the cheapest account, by a few cents. However, once you maintain a positive balance of more than a thousand rand Absa is surpassed by Capitec, being the only bank in this category that pays interest. Consumers with self-discipline will therefore get away cheapest with Capitec. Leaving interest aside, we note that the difference between cheapest and most

costly, for an account with 17 transactions, is not even R3,” Du Buisson said.

On a cost level, Absa’s Gold Value Bundle is the cheapest account. When ATM transaction prices are included, there’s a vast difference between banks – with FNB transactional banking winning at the retail counter.

“Consumers therefore should look carefully at what is included in their packages and what methods are preferred by their banks, for example to withdraw money,” said du Buisson.

A little something, something

The report also analysed loyalty programmes because flagship accounts are indistinguishable from their value-adds.

“We compiled a list of transactions to see how many rewards points a consumer would earn on those transactions. Here, FNB is far ahead… A consumer doing everyday shopping at the prescribed stores would get back no less than R463.20. With the same list of transactions, the consumer would get back R174.30 at Standard Bank, which is in the second place.”

Higher middle-class accounts were virtually impossible to assess without looking at their rewards programmes.

“In their more costly bundle accounts, all banks have expanded their lists of free transactions that are included, with the exception of ATM withdrawals, which have become more

costly, especially at FNB. In this category, consumers should ensure they get most from their packages… Based on costs… FNB’s Premier Cheque Bundle would be the costliest… and Absa’s Premium Banking the cheapest.”

All the banks – excluding Nedbank – were transparent in the way points were earned and allocated.

Making hay

FNB was quick to capitalise on the results, by releasing its a statement, saying that the report shows its customers get up to four times more “money back” via eBucks rewards compared to what other banks offer.

“Solidarity states that a customer who is on eBucks Level 4 can get back no less than R463.20 if they performed a similar set of transactions as those in the Solidarity methodology, which includes filling up fuel at Engen or buying groceries at Checkers.”

Raj Makanjee, FNB Retail and Private Banking chief executive said: “We welcome the consideration of rewards in the evaluation of overall banking value. The recognition of eBucks… attests to the significant strides we continue to make in providing our FNB and RMB Private Bank customers with superior value… the programme continues to play a vital role in helping customers better manage their money. Now more than ever, customers are looking for value and this recognition affirms that FNB is unmatched in that category.”

Since inception 20 years ago, eBucks has paid out more than R14.2 billion in rewards to members, the statement said.

Nedbank’s Dharmesh Bhana, executive for loyalty and rewards, said the bank has adopted a rewards approach that is “unlike that of competitors” referred to in the report.

“While traditional rewards programmes focus solely on giving clients guaranteed rewards, usually in the form of points, the new Nedbank Greenbacks programme is designed to entrench, develop and change client behaviour to encourage smarter money choices and overall better money management.

“In this sense, the new Greenbacks programme is a money management programme that includes broader propositions as opposed to a regular ‘swipe and earn’ programmes available in the market.

“While guaranteed rewards (in the form of points) is the most commonly used mechanic by the vast majority of South African rewards programmes, the Nedbank Greenbacks programme leverages other behavioural mechanisms including surprise rewards and competitions alongside traditional guaranteed rewards to encourage behaviour change across different products offered by Nedbank.”

* Georgina Crouth is a consumer watchdog with serious bite. Write to her at [email protected], tweet her @georginacrouth and follow her on Facebook.

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