“Bare-bones” banking has arrived —but it costs.
The Mzansi project, involving South Africa’s Big Four banks, was launched this week with the aim of bringing South Africa’s low-income households in from the financial cold.
But inspection of the bank charges suggests they may price poor clients out of the market.
From a banker’s standpoint the Mzansi bank charges are low — in some cases 50% of those on a “normal” account. But even fees of R20 a month will be prohibitively high for many of Mzansi’s potential customers.
Some banks have offered convincing case studies of how easy it will be for customers to minimise their bank charges. But for many first-time bank account-holders strategising to keep their banking costs low could prove too demanding.
If millions of unbanked South Africans are to step into the world of mainstream banking, the banks will have to undertake significant consumer education.
Account-holders will pay no monthly fee, and clients will have the advantage of being able to use any bank’s ATM at no additional fee. The opening balance is R20 for all the banks except Postbank, which requires a R10 initial deposit.
Only a South African identity document is required to open an account — no payslip is required. The latter provision is designed to give the self-employed access to services.
However, the pricing of transactions varies enormously among the banks. A cash withdrawal from an ATM will cost Absa’s Mzansi clients R3,25; and FNB’s clients R4,50 from its ATMs and R1,50 from its mini-ATMs. Postbank charges R4,75 for the same transaction, Standard Bank R4 and Nedbank, with its two other brands, Peoples Bank and Old Mutual Bank, asks R5.
The same applies to cash deposits. Absa’s clients will pay R10 to deposit cash at an ATM; FNB charges R10,75; and Standard R4, with one free deposit a month. Postbank, by contrast, allows free deposits at its participating branches.
With such pricing variations, competition among the banks for Mzansi account-holders could be fierce. For the banks, economies of scale will be critical, especially in the initial stages in Mzansi’s development. Experience has shown that once hooked, few individuals move to a new institution.
At this week’s launch, Standard Bank CEO Jacko Maree said that he wanted people to use Mzansi to “just try” banking and see how they like it. Maree conceded he had no idea of the potential uptake of Standard’s new account. Also at the launch, the Banking Council’s Charles Chemel cautioned that an early sign-up of six million new Mzansi account-holders was not expected. The implication is that no one knows how the target market will respond.
The banks’ collective ability to convince people to sign up for Mzansi is much more than just a marketing issue — it has repercussions for the national and regional economies.
The intention is wider than greater equity in the provision of financial services. The theory is that once people have been converted to a banking “mode” they will have access to higher levels of economic activity, opening the door to economic self sufficiency and prosperity.
The past lack of even rudimentary banking facilities for millions of South Africans is seen as a significant inhibitor of small business development, employment creation and, ultimately, growth.
Apart from facilitating income generating activity, a bank account is intended to make saving easier. Nedbank’s Mzansi spokesperson, Colin Donian, said: “We anticipate the Mzansi account’s affordability, accessibility and simplicity will provide an incentive to save.
“Over time, account-holders that use the account for transactional purposes will establish a credit history. This potentially establishes the prospect for the extension of credit to Mzansi clients. If credit is used for small businesses and entrepreneurs, there will be substantial economic benefits.”
On the accessibility front, Mzansi shapes up better than it does on pricing. A year after the unveiling of the Financial Sector Charter, previously disadvantaged communities have access to basic banking facilities. In all, Mzansi will be available at 15 262 dedicated banking outlets.
The service is offered at 1 100 online post offices of the Postbank; 4 000-odd FNB outlets; 3 200 Standard Bank outlets; 5 434 Absa outlets, as well as 120 000 point of sale contacts in retailers’ premises; and 1 528 outlets of Nedbank, including Peoples Bank and Old Mutual Bank.
Plans are also afoot to extend access. Absa says it will focus 80% of its distribution network development on previously disadvantaged areas. Currently it has one full branch, one self-service centre and seven ATMs in Soweto; within 18 months it plans to expand representation there to 27 ATMs, three full branches and two service centres.
Zweli Manyathi, CEO of FNB branch banking, said a further 1 000 of the group’s mini-ATMs were due for installation. “The mini-ATM has helped revolutionise access,” Manyathi said. “This cash-dispensing device can be installed anywhere where there is power and a telephone line.”
Easy for some
How accessible is Mzansi? Motlatsi Lebea and Cheri-Ann James visited four Jo’burg banks to find out.
First National Bank (Gandhi Square)
An employee explained clearly what the account is and how I would benefit. She told me I needed a minimum of R20 and an ID to open the account and that the maximum it could hold was R15 000. She explained that the card could be used at any participating bank with no additional charge and that I could upgrade my account if I started to earn more money.
Peoples Bank (Simmonds Street)
The information clerk looked at me blankly when I told him I wanted to open a Mzansi account and said: “Basically, it’s a savings account.” He couldn’t tell me about the benefits, but said I needed my ID, proof of residence, rates and tax from my landlord and letters from the newspapers I freelance for as well as R50 to open the account. He said it was designed for pensioners and he could not download the form I needed to fill in. He phoned for assistance , only to realise that the form had been on his desk all along. He said my landlord should fill it in.
Absa Bank (corner of Troye and Main)
The helpful woman behind the desk explained that I needed an ID book and proof of residence. She told me I could use the card to withdraw money at any participating bank at no additional charge and that I needed to keep a minimum of R20 in the account. She told me bank charges were low.
Nedbank (President Street)
The person at the information counter told me to bring my ID, proof of residential address and R20 to open the account. She said there was no charge for opening the account, that I could withdraw money at any bank with a Mzansi account and use the card as a debit card.