Bank fees, we are told by a recent voluminous report for the Competition Commission, have little to do with costs. They also appear to have little to do with service, as you can pay a lot or almost nothing for exactly the same facility.
Most consumers know that shopping around for the most competitive home loan can lead to substantial savings. But far fewer probably realise that shopping — probing is probably a better word — at your own bank can bring substantial, even massive, savings. Without even shopping around.
At R20 a stop order and R10 an ATM withdrawal on First National Bank’s pay as you use option it is easy for a household doing 30 transactions a month to incur bank charges in excess of R300 a month.
At 30 transactions a month this is an average of R10 each, a level that sustains suspicions that South Africa’s dominant banks, somehow acting as a complex monopoly, are taking more out of your pocket than they should be.
I was poking about the First National Bank (FNB) website after the publication of the report and was more than a bit surprised to find it has an “electronic pricing option” that allows unlimited transactions at R85 a month. At 30 transactions this comes in under a relatively modest R3 per transaction, an immodest 70% saving.
The electronic pricing includes FNB ATM withdrawals, debit orders, stop orders, Visa debit card, Visa cheque card, Petrol card, electronic transfers, electronic account payments, balance inquiries, cheque deposits and electronic deposits. This lot costs R75 irrespective of the number of transactions you do.
For a further R10 you get a cheque account, which includes a cheque card, a petrol card with free roadside assistance, lost card protection, an SMS security alert service, Internet, telephone and cellphone banking, participation in the eBucks reward scheme, a paper statement each month, free Internet and e-mailed statements and a free chequebook (which carries separate transaction costs).
But how does the average customer know such a package exists? Does FNB send out postal, e-mail or SMS alerts to customers advising them that they may be (dramatically) over-paying on their monthly bank charges?
A relationship manager at an FNB branch tells me that every year since 2001 pricing options have been sent out between September and October to cheque-account customers with their statements.
For the past three years diaries, which include pricing options, have been sent to clients.
Pricing is disclosed on the FNB website. ATM customers are told they can either phone the call centre or go to their nearest branch for detailed pricing information.
A letter was also sent to cheque clients in August last year detailing the various options and inviting clients to change them if they wish.
Pricing options have been extensively advertised in the media since November 2004, the relationship manager said.
I asked her to e-mail me a copy of the last communication sent to me spelling out pricing options, but was told that the 55-page document is too dense to send by mail. I could get a copy at my nearest branch or on the Web.
The branch has brochures prominently displayed. Under “flexible and transparent pricing” one lists four options and says “details of the latest pricing can be obtained from the pricing guide available in your branch or on www.fnb.co.za”.
A helpful assistant offered to give me a copy of her guide, explaining she has not seen other copies for a long time.
Fortunately a colleague had a copy, which came from the second draw of his desk, so the helpful assistant could keep her only copy.
The front page of FNB’s website includes a prominent link to the pricing guide. This link can’t be opened using Internet Explorer on my Apple Mac, but the Safari browser opened the self-same document, which had been resident in the helpful assistant’s colleague’s second draw.
Since November 2005 FNB has also advertised its pricing line (0860 1122 44) in the media and invited customers to call to be advised on the best pricing options, the relationship manager told me.
Option five at FNB’s telephone-banking call centre is for pricing inquiries. I heard about pay as you use, electronic pricing and another option, fee saver. With fee saver you have to keep a minimum balance of R8 000, on which you do not earn interest, but you get 35 free transactions a month.
The loss of interest on the R8 000 is worth about R30 a month, meaning that 30 transactions a month have an average cost of R1. This is still much more expensive than jurisdictions such as the United Kingdom that have zero banking fees, but a whopping 90% saving on pay as you use.
FNB’s fees are prominently displayed on every account it sends out. They can hardly be said to be hidden. Costs are also detailed on a per-item basis.
But the huge disparity between the various pricing options beggars belief.
James Fowle, pricing manager at FNB, says it is key that customers make sure they are using the right option. He says fee saver is the best-priced option, but is only of use to a small proportion of people who can afford to maintain the R8 000 balance.
He says electronic pricing limits monthly costs to R85, but does not suit customers who do not use electronic media. He says this option is competitively priced because manual banking, such as through tellers, is relatively expensive.
Non-electronic customers can also use fee manager at R45 for six transactions a month, R85 for 12 and R135 for 20 transactions. These average R7,50, R7 and R6,75 per transaction respectively.
The Competition Commission will now formally probe banking charges. It appears, based on the FNB case, to be no easy matter. Customers are paying anywhere between R1 and R10 a transaction based on the example outlined here.
One senses that FNB is proud of its offerings such as electronic pricing, which it sees as a market leader. “FNB has done a lot that our competitors don’t,” says Fowle.
He acknowledges, though, that more needs to be done to enlighten customers about pricing options, but says packages and the pricing line have been advertised both in direct communication with clients and in the media.
I can’t think of any business that could sell you the same service or product for either R1 or 10 times that.
My own feeling is that I have been burned. I don’t want to find out about better pricing options on obscure Web pages. If I go into overdraft for a moment I get a call from a bank manager to tell me this.
I rue the day that my bank will call to advise that I am not using the most efficient pricing option. But I won’t be holding my breath.