Banks ignore price warnings
The feature story in this week’s Finweek magazine focuses on the attitude of South Africa’s big four banks to banking fees. The article concludes that banks have done little to lighten the consumer fee burden since the gauntlet was thrown down some four years ago. For the most part fees at the countries major banks have been on the rise in recent years, often at rates well in excess of inflation.
The problem is one of competition. Local consumers are limited in choice to one of four main-stream banks: ABSA, First National Bank, Nedbank or Standard Bank. And complex pricing structures for transactions, products and services make it very difficult for consumers to choose between them.
Comparing charges for the fictional family
Finweek conducts there annual comparison of banking charges by creating a fictional family. This family uses the following banking products, all held at the same bank:
· Two current accounts
· Each current account has a debit card with an overdraft limit of R10 000 and annual card protection
- Each current account has a cheque book
- Two garage cards, with card protection fees
- Two credit cards, with card protection fees
- One internet banking account
- Mortgage debt of R500 000
- Two car loans of R150 000
This basket is probably not an accurate profile of the average South African bank customer; but that’s not the intention. What the survey aims to do is compare fees for product and services across South Africa’s main banks to get an idea of which offers the most competitive ‘overall’ pricing structure...
The survey throws up some alarming results. The first is that it’s extremely difficult to get accurate pricing details for some of these services. Finweek reveals that they often had to make repeat telephone calls to the bank’s respective customer support centres to make sure of the relevant fees. And the second is that despite mounting pressure on banks to reduce fees and increase transparency the majority of options show increases year-on-year since 2005.
ABSA emerges as the most expensive bank
According to Finweek “ABSA has emerged as South Africa’s most expensive bank in 2008…” This follows year-on-year increases of 31% for ‘pay-as-you-go’ services and 23% for a ‘package’ solution. These price movements are based on the fees incurred by the aforementioned fictional family were they to use ‘pay-as-you-go’ or ‘package’ fee models from this bank.
On a three year view (since 2005) the ‘pay-as-you-go’ fees are higher at three of the banks surveyed. Standard Bank is 17% higher, ABSA (+32%) and First National Bank (+11%). Nedbank managed a moderate fall in this category, with fees reducing by some 12% over the three years. Fees for ‘package’ solutions are higher too… Standard Bank packages are up 60% since 2005… ABSA (+30%) and FNB (+0.1%) follow suit, while Nedbank has again managed to reduce charges in this area by 47% over the same time frame.
And here’s the clincher. Despite spending more than 40 hours on researching banking fees, Finweek struggles to determine which bank account represents the best ‘value’ option for their fictional family. The conclusion was that products from the Nedbank stable would be best… It’s slightly counter intuitive because there’s a perception that Nedbank is an expensive option…
Websites don’t help
So the magazine turned to comparison websites like www.thinkmoney.co.za and www.justmoney.co.za. These services provided quick answers but left the consumer with many ‘unanswered’ questions… The sensible solution for a family hoping to cut down on banking fees is to consolidate accounts, cut out on expensive luxuries like chequebooks and move most of their transactions to the bank’s online facilities. And remember – cheap banks like Capitec, Integer and Bidvest and cell phone banks like MTN Money and Wizzit are affordable and convenient; but offer limited services.
Editor’s thoughts:
It’s not too difficult to work out why banks are resisting transparency where fees are concerned. They put shareholders above customers: profit remains the primary business objective. This situation will persist for as long as the domestic banking environment is dominated by four or five large players. Do you think it’s time to open the South African market to UK and US banks? Add you comments below, or send them to gareth@fanews.co.za
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