Teba gives birth to Ubank
This week UBank was launched as a retail bank for the mass market. The bank is a re-born version of Teba Bank which was set up in 1976 as a savings vehicle for mineworkers, the main trustees being the Chamber of Mines and the National Union of Mineworkers.
In 2006 it was decided by NUM in conjunction with the Congress of South African Trade Unions to extend the banking services to other workers and is in reality a workers bank.
The concept is fantastic; it deals with the issue of conflict of interest between customers and shareholders as the bank is not out to make excess profits. However, no matter how the ownership is constructed, people want cheaper banking. The question is whether Ubank delivers.
UBank has come to market with three packages—bronze, silver and gold. On the face of it they are expensive. For a bronze account you pay R59 a month. This is the same price as FNB Smart Account, however unlike FNB’s offering; there are limits on the number of included transactions.
The Silver account and Gold account are R99 and R139 respectively making them among the more expensive packages in the market and banking transactions included are very limited.
If you simply compare banking services, Ubank is pricey, however it brings a very different value proposition than the other banks in that the fees include airtime, discount shopping vouchers worth R600 a month and discounts on travel such as City to City buses.
UBank says it has done its research and that the offering matches the needs of its clients. However one would need to have a steady income to pay the monthly fees. It remains to be seen if higher income earners would find the value-adds as attractive or whether they simply prefer cheaper banking.
If you opt not to take a package and stick with “pay as you use”, the transactional banking fees are not that competitive if you compare to Capitec or FNB EasyPlan both of which play in this market.
The plus is that there is no monthly management fee on Ubank (the other banks charge between R3,75—R4,50 a month) and Ubank customers get two free cash deposits a month. Branch withdrawal fees are relatively low compared to the other banks at R12,50. Both Capitech and FNB EasyPlan only facilitate ATM withdrawals which bank customers are not always comfortable using.
But otherwise across the board the fees are generally higher. For example Ubank charges R1,50 for a debit card transaction which Capitec offers for free. Cash back, where you can draw money when shopping at retailers like Pick n Pay and Shoprite, has been a big Capitec campaign and currently Capitec charges no fees, although customers normally pay R1. Ubank is charging R3 for when you make a card purchase and withdraw cash.
In response to Mail & Guardian‘s question about fees, Ubank says it is investing in the development of innovative transactional channels which will give customers convenient, anytime, anywhere, access to their accounts. “We already offer additional channels for deposits at the Post Office and EasyPay outlets. These new initiatives aim to be extremely cost effective which in turn will benefit our customers through reduced fees and convenience. This includes our cashback fees where we are investigating alternative retail (in store) models which will make us very competitive”.
Rating the savings
UBank comes from a tradition of savings and strongly promotes savings as part of its offering. The rates are competitive compared to most banks but again it struggles against Capitec and FNB EasyPlan both of which offer rates of 7% on balances below R10 000 and then fairly aggressive rates on fixed deposits.
Competing against the likes of Capitec will not be easy, but that may also be a function of the banking model that Ubank has adopted.
Capitec grew out of micro lending. The high fees charged to borrowers have been used to fund the expansion of a retail bank and they can certainly offer high interest rates to depositors when they are charging micro-lending fees to borrowers.
Ubank on the other hand has built itself through the savings of some of the poorest in our society.
Arguably this approach has the moral high ground and should be lauded especially in a country where households are actually dis-saving and our debt levels are at unprecedented levels.
Many would argue that a business born out of ethics and morality has a better chance of long-term survival. However price does matter, especially in banking where people really hate to pay fees. Ubank currently has a captive market in the mining sector and it will be able to grow its base from there, but if it wants to break into the urban market the pricing at this stage is not that compelling.
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