David le Page
This week saw the official launch of the first non-bank credit card in South Africa, following closely on the heels of an innovative product from Investec Private Bank.
The move may finally stimulate competition between banks in South Africa.
The Explorer card, which is backed by Mercantile Lisbon, claims to break new ground in the levels of service and usage rewards offered. Most South African credit cards can now be linked into South African Airway’s Voyager programme, but the accumulation of airmiles and the enjoyment of cashing them in can be a long and tedious process.
An Explorer card, on the other hand, will get you benefits as you use it: 20% off NuMetro movie tickets at selected times, 60 days’ insurance on all purchases, the ubiquitous local and international cover from MedRescue International, domestic and international travel insurance.
Other initial discounting partners include Mvenpick Hotels (formerly Karos), Avis and PG Autoglass.
Administering the card is likely to be less of a headache. You can apply online (www.explorercorp.com) or by telephone, and have it delivered to your door within 24 hours. Statements may be e-mailed to you.
It’s a Visa card, so usage is international. Interest rates may end up slightly lower than the standard extortionate rates, but have not been finalised. The annual cost of the basic card will be R110.
The Investec Private Bank card is something of an abstract proposition for most of us, the minimum financial qualifications being an annual salary of R400 000.
However, it is unusual in combining account credit card and current account functions – you’ll get only one statement at the end of the month.
Investec has abandoned what it calls the “irrational” pricing policies of the industry at large, which usually charges the prime interest rate plus 10% for credit, encouraging “gold card clients to spend and settle on the due date rather than use the card as an overdraft facility”.
Both Nedbank and First National Bank have denied being in the least bit inspired by the Investec product, arguing that as a premium product it is not relevant to their products.
But there are aspects to the Investec card that could easily be adopted by the banks, and would, if anything, cut costs for them.
For example, the Investec card offers greater powers than many other banks to the online banker, such as adding accounts to your profile instead of just shuffling money between the accounts the bank has painstakingly set up for you. It also offers a form for the cancelling of financially fascist debit orders.
As an aid to security, whenever a scheduled payment is made or an ATM withdrawal goes through a message can be sent to your cellphone. If you know nothing of the payment this will alert you to a security problem.
The Explorer card’s benefit for its marketers is information. Explorer Corporation plans precisely targeted marketing based on your spending habits.
If you already take pleasure in irritating direct marketers by returning their mail unopened, this may alarm you.
A new catchphrase, “permission marketing”, may provide some reassurance. Despite aiming to profile you down to your shoelaces, Explorer Corporation chief executive Aaron Stanger is adamant his company does not plan to deluge you with junk mail.
Stanger argues the South African credit card market is 50% underexploited, and Investec is likely to seize a large chunk of it.
Within 24 months, the Explorer Card will also be a smart card, ready to provide the same services to a mass market.