Thursday, August 10th, 2017
Strong competition has continued in the market for personal transactional bank accounts in 2017. This is according to the eighth annual edition of the Solidarity Bank Charges Report, released today.
According to Gerhard van Onselen, Economics Researcher at the Solidarity Research Institute (SRI), there is evidence of continuing strong competition in the transactional banking space. “The Big Four banks have little room to increase fees at the lower end of the market, and this is owed to the sustained pressure from Capitec’s offer. The banks also cannot allow the gap between the bundle accounts, marketed at middle income groups, and the cheaper accounts to get too big. Otherwise they run the risk that clients may shift to the cheaper options or simply move to competitors,” Van Onselen said.
Van Onselen noted that in the low-income and basic banking space, judging on fees alone, Capitec is narrowly beaten this year by Absa’s Transact account, FNB’s Easy Account and Nedbank’s Pay-As-You-Use account. “However, when the interest paid by Capitec is taken into account, Capitec is still, but just barely, the cheapest account. With that being said, Absa’s Transact account is now a truly compelling proposition for clients who rarely if ever hold more than R2 000 in their account,” Van Onselen added.
Considering the flagship accounts of the Big Four banks, marketed at clients with middle-class income and sophisticated banking needs, Van Onselen showed that Standard Bank’s Elite Plus account is no longer the cheapest option among these bundle accounts. “The Elite Plus account by Standard Bank is now surpassed by Absa’s Gold Value Bundle account and Nedbank’s Savvy Plus account. After doing away with withdrawal fees for cash at retailers, Nedbank’s Savvy Plus account is competitive at this level this year for clients that do not wish to bank at Capitec for any reason,” Van Onselen said.
“Clients falling in the middle-class income category requiring ‘no-frills’ banking may benefit from considering Capitec’s and the relatively new offer from Old Mutual. However, when you take the interest on positive balances and existing ATM and branch infrastructure into account, Capitec is the stronger proposition in this sense,” Van Onselen added.
For accounts marketed at higher middle-class clients, Van Onselen stated that Absa’s Platinum Value Bundle soundly beats the other banks on pure cost considerations. “Costs are, however, not the only reason clients consider these more expensive accounts, which usually include additional benefits, and such benefits require individual consideration,” Van Onselen added.
The report also showed for example that the price for a mid-level bundle account has remained around R100 per month for several years now; this represents a real decrease in the price of these accounts when consumer inflation is taken into account. “While exact comparison of accounts over time is difficult owing to changes in the names and structures of accounts, comparisons of inflation-adjusted costs of similar accounts over time suggest there have been large decreases in the real cost of transactional banking almost across the board,” Van Onselen concluded.
For the complete Bank Charge Report, click here.
To listen to Van Onselen’s sound clip, click here.