Earlier this year we saw FNB challenge Capitec with a new bank offering that looked suspiciously similar to Capitec’s offering, along with new branches aimed at the mass market.
EasyPlan was clearly a direct challenge to Capitec which is taking market share from the big four.
Last week Absa entered the market with its no-frills banking offering Absa Transact aimed at the entry-level market, including students. Like the FNB EasyPlan account, Absa has opened specific branches to cater for this market and to cut banking costs.
These branches are best described as a combination between a Capitec branch and FNB’s automated deposit-taking tellers which FNB launched two years ago.
These branches, formally named: “Entry Level and Inclusive Banking outlets” or ELIB for short, have grown out of a pilot project by Absa to open branches which just provided loans to the mass market.
Currently there are 63 loan branches which makes up about 8% of Absa’s branch network yet they account for 35% of all loans issued.
Absa has converted 10 of these loan branches into transactional branches. Apart from taking out loans and doing banking transactions via automated tellers, customers are also able to take out funeral cover, open savings accounts as well as the new no-frills Absa Transact account at these branches.
Each branch has a staff member who educates customers on banking, especially electronic, self-service banking. According to Lawrence Twigg, the managing executive of Absa’s entry level and inclusive banking, the demand for education around bank accounts is very high.
Within the first week the flagship Bree Street branch already had 300 customers undergoing education programmes, 200 customers had signed up for Absa’s SMS notification programme Notify me and 300 customers had opened a transactional account — all with no marketing. Absa has about seven million customers in this segment.
Although Absa is behind the turquoise bank in directly challenging the Capitec market — and is certainly not the cheapest bank around — it has over the last few years produced innovative products for the mass market.
Absa was the first to market with Cash Send, which allows Absa customers to send money anywhere in the country where the recipient can withdraw the cash without an account simply using a PIN code. Since the launch in 2008, over R300-million worth of transactions have been completed.
Absa also launched the pre-paid debit card which is possibly the cheapest way for low income and irregular earners to transact electronically.
Customers do not have to have a bank account and can simply load money on to the card, or have their employer do so, and all point-of-sale transactions are free.
Absa has also just launched “in-store banking” for its rural customers that allows deposits, withdrawals and purchases in participating retail stores. (Watch this space as Standard Bank is about to announce what is has been doing in converting spaza shops into mini-banks)
How does price compare?
For customers who still feel more comfortable transacting in a branch, the cost savings are significant. For example at a normal Absa branch a customer withdrawing R500 would pay R22,50; but now they would pay R8,50.
A R500 deposit would cost R6,30 vs R8,75. There is no cost for a balance inquiry compared to R2,45 at a normal branch and a fund transfer would cost R3 compared to R17,50.
So there is a saving between using a traditional branch and an ELIB branch if you are an Absa Transact client, however the fees are still high by comparison.
Even if an Absa Transact client withdrew money from an ATM they would pay R8,50 for R500 — by comparison Capitec charges R3 and FNB EasyPlan customers would pay R2,95. However on mobile banking, Absa’s charges are significantly lower, suggesting that Absa would like to dominate the mobile banking space.
With educators in the new branches teaching customers how to adopt mobile technology, Absa is joining the general banking drive to push people out of branches and on to self-service channels.
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