Ivo Vegter has not set foot in a bank since July 2001. His most recent interaction with his bank was to call them at 8pm and ask them to collect a cheque for deposit the next morning. They did.
Vegter is one of about 1,04-million South Africans who bank online —and, according to recent research by World Wide Worx, the number is growing. Arthur Goldstuck, an Internet analyst who led the research, says the number is expected to increase by more than 30% this year.
Online banking has not reached saturation point and has grown by between 15% and 28%, says Althea Bacchialoni, principal analyst at local IT research house BMI-TechKnowledge.
Bacchialoni says Internet banking in South Africa compares favourably with overseas standards both in security and functionality.
“[Our banks] are even ahead in some aspects, as the banking infrastructure in South Africa is renowned to be of a First World standard,” she says.
Herman Singh, director of technology engineering at Standard Bank (which claims to have 30 000 personal Internet banking clients and 65 000 business online banking clients), says South African banks deliver a comparable service to each other and “stand head and shoulders above international banks”. ÂÂ
According to Singh, South African banks are considered experts and have been approached by international banks for advice on Internet- banking services.
One of the reasons South African banks are seen as advanced is because of their ability to make inter-bank payments within a maximum of two days and intra-bank payments almost immediately. The same transactions can take up to seven days at a foreign bank, says Absa’s general manager of digital channels Christo Vrey. Absa says it has 430 000 online clients.
“The depth and range of financial services offered by the larger South African banks means that we can compete on functionality with any bank worldwide. Many overseas banks focus on one specialised offering, such as loans or credit cards, without providing a full bouquet of services,” says Vrey.
When it comes to security, South African banks are also tops, say the experts.
“Even though the average customer has high levels of confidence in the security layers provided by [South African] banks, this aspect still remains their largest concern and an inhibitor for those who are still considering online banking,” says Bacchialoni.
Gary Colman, a South African who used to work in the United Kingdom and now lives in Switzerland, uses the Internet banking services of Standard Bank in South Africa, Natwest in the United Kingdom, and UBS in Switzerland. He finds that functionality is best at UBS, including the ability to transfer money online anywhere in the world — and if you don’t know the bank’s Swift code, it offers an online database.
“As far as security goes, UBS is by far in the lead. They give one a smartcard [which looks like a full-size SIM card, about the size of a credit-card] and a little hand-held calculator device into which it slips. You go to the Internet banking URL, enter your user identity, and it prompts you with a number. You enter your PIN number into the calculator, to unlock the card. Enter the number into the device [as shown on screen], and it returns an entry code. Enter the code into the webpage, and you’re online,” says Colman.
First National Bank (FNB), which has 230 000 online clients, recently launched a similar device, called the Digitag, which generates a unique eight-digit security code to use in addition to the user identification and password to authorise login to FNB and RMB Private Bank Internet banking.
In Denmark, another South African who used to bank with Standard Bank, Wicus Hefer, cannot access his account from any computer other than his PC at home — and he likes it that way.
“I downloaded the online banking program and was then sent a once-off PIN. You are forced to change it and even though I can now disclose both my PIN and my account number to someone, they have to have access to my home PC to access my account,” Hefer says.
And when he’s not close to his home PC, he can use the phone banking system, which, like the online banking service, is free.
Our banks might be offering the same or better services as international banks, but they certainly cost more. In Denmark, for instance, Internet banking is free. There is no monthly charge for Internet banking from Danske Bank and no transaction fees for individual transactions, although transactions attract quite hefty fees if they are done within a banking mall. Colman says that Natwest and UBS’s services are similar to that of Standard Bank, except that they are free.
Most South African banks charge a monthly subscription fee for their online-banking services in addition to charges on individual transactions. Subscription fees range from about R18,50 (Absa) to about R22,80 (Nedbank). FNB has no subscription fee, but consumers charges on individual transactions.
So why are our online banks so pricey? One reason could be that they enjoy a strong monopoly in this country, with too few big players dominating a relatively small market. Another reason may be a numbers game.
“The big inhibitor in South Africa is a financial constraint,” says Bacchialoni. “We have a large unbanked population and even those who are banked often lack the finances to establish themselves with the initial PC and Internet access for Internet banking, plus the monthly payment for the service.”
Possibly the best-known example in South Africa of a bank that did things differently is 20twenty, which had only been going for six months when its principal, Saambou, was put into curatorship.
At the time of curatorship, 20twenty had about 40 000 customers, only 6% of whom closed their accounts. Twenty-thousand accounts remained active during the curatorship, leaving about 17 600 accounts that weren’t closed, but haven’t been actively used either, probably because people were afraid of losing their money.
The online bank’s unconventional, straight-talking approach has inspired loyalty. During curatorship, account holders started an online fan club and even mooted the idea of buying the bank themselves.
20twenty’s CEO Christo Davel describes the bank as “the most un-bank-like bank you’ve ever seen”. He says 20twenty’s strategy has been to treat its customers “truly exceptionally”.
Goldstuck says his research has uncovered many of the factors behind the loyalty of 20twenty’s customers.
“It offers private banking-like service, but one of its big advantages is the online compliments and complaints area. The CEO’s e-mail address is even available on the website.
“That level of corporate interactivity is rare internationally, not just in South Africa. The visual theme of the 20twenty’s website is also unconventional, but professional and customer-oriented,” says Goldstuck.
He says that in the general online e-commerce arena 20twenty is one of four companies doing things right. The other three are kulula.com, Kalahari.net and McCarthyonline.
Vegter, an award-winning technology journalist, banks with 20twenty. In his opinion, as soon as 20twenty opens its doors again anyone who doesn’t like dealing with traditional banks should bank with them too.
“I get all effusive and raving when I talk about [20twenty]. They rock more than Stevie Ray Vaughn. Seriously. And to allay any fears about what happened to Saambou, at least 20twenty is now backed by a serious foreign entrant with lots of African banking experience.”
In September last year Standard Chartered bought the online bank and, according to Davel, the bank is busy gearing to open its online doors for new business again.
Two years of curatorship means that 20twenty has fallen behind the others in terms of technology and security, so the bank is currently “getting its technology up to standard and recruiting new talent”. Davel says an announcement about when the bank will relaunch is due soon.
The Banking Council: www.banking.org.za and Compare bank fees at www.bankmonitor.co.za