Banks blame small volumes and fraud for rising charges – and expect customers to grin and bear the costs David Le Page The apparent neglect of the cheque management system by South African banks is a major reason why consumers pay higher and higher bank charges at a time when automation is reducing costs in practically every other service industry. According to the Banking Council’s 1999 report on bank charges, “High costs in South Africa are substantially attributable to inadequate volumes to justify the infrastructure involved and the high level of cheque fraud that pushes the costs up substantially.”
The Banking Council, which represents the industry, concedes in its 1999 position paper on banking charges that bank charges in South Africa are nearly three times higher than in the United Kingdom – and consumers in that country have recently protested vigorously against the perceived greed of their bankers. According to the council, over the past five years banking charges have increased an average annual 3% faster than inflation. Of all the services offered by banks, cheque accounts are for them the least profitable and the most hassle. According to the council, “in 1998 the banks lost R151-million on cheque fraud alone”. Despite advances in technology, not to mention considerable investment in technology companies by some banks, the cheque-clearing system – and the time it takes to clear cheques – hasn’t been significantly revamped in years. The seven- day clearing time has been in place “as long as I can remember”, says Charles Whyte of Standard Bank’s forensics division. In fact, many cheques are not cleared in seven days, though none of the banks can offer figures on delayed clearing. According to Whyte the current system demands that each of the million or so cheques passing through the clearing system each day must be handled several times by people.
One measure frustrated cheque users have undertaken to protect the security of their cheques, taping or foiling, has proved to make fraud easier, and banks will not be accepting foiled or taped cheques from December 1. Whyte says that to avoid fraud, customers should mark cheques both non-transferable and non-negotiable, draw lines through unused space, cross out the “bearer” text, and preserve the security of their cheque books.
He said that unfortunately South African fraudsters are “world-class” and that South African bankers regularly amaze their United States and British counterparts with accounts of local criminal ingenuity. The newer money transfer technologies are also comparatively primitive. E-mails may be instantaneous, but even when there is absolutely no doubt about your balance, an electronic transfer still takes two days for most banks to process, due to the nature of the Automated Clearing Bureau through which all such transactions are passed.
South African banks also charge for Internet services. Internet services demand far less physical infrastructure than traditional banking and new, dedicated Internet banks in Europe are able to charge far less than average. But a monthly charge of R20 is typical for Internet banking services in South Africa. Standard Bank seems particularly beset with fraud and two weeks ago made it impossible for transfers into credit card accounts to clear in less than 10 business days, effectively blocking access to client money for 10 days. The decision was taken under pressure from a degree of credit card fraud which it would prefer not to reveal, but is currently well in excess of R15- million.This is well over the usual seven- day period required to clear cheques. Standard Bank officials, adamant that they can relate many such woeful stories, insist that the 10-day waiting period for transfer clearance is in the best interests of their customers.
However, they admit that their system does not distinguish between an account with R100E000 cash in it, and an account with R100E000, R50E000 of which is from an uncleared cheque. Both clients would have to wait 10 days for a transfer out of their accounts to clear.