The Competition Commission’s probe into bank fees is yet to be formalised, but already there are signs of major price cuts and new competitive winds beginning to blow in the sector.
Nedbank, one of the Big Four, this weekend announces fee reductions averaging 13% across the board. This equates to R700-million of the fee and commission income of R5,4-billion the bank earned last year.
Not a single Nedbank fee will be increased, some fees are scrapped, fees based on complex formulas are simplified to a flat fee and fee reductions ranging from 6% to 66% will be announced on a range of products.
Nedbank emerges in a survey of the Big Four by the Mail & Guardian as the least competitive by far, costing R209 for a set of specified banking services compared with Standard Bank’s R93. The same package of services would cost R115 at FNB and R147 at Absa (See “Cheaper by the bunch”).
The comparison shows that customers who choose to use bundled options rather than using individually priced transactions stand to save R80 (FNB), R88 (Standard Bank), or R71 (Absa) a month. Nedbank’s current bundled option costs R48 more than using the individually-priced option.
Nedbank’s Bryan Mclachlan says the new fees are part of repositioning Nedbank across all markets with a single strategy relevant in all segments.
Nedbank in partnership with Old Mutual Bank recently launched the Everyday account, which packages a set of services for R85 a month.
This includes four ATM withdrawals at Old Mutual Bank and Nedbank ATMs, one cash deposit, one branch withdrawal, all cheque payments, stop orders, electronic balance inquiries, debit orders and cheque and garage debit card point-of-sale transactions
Mclachlan sees FNB’s recent “aggressive” advertising of its fees as a response to Old Mutual Bank’s Everyday account.
An FNB source says its pricing adverts are not a response to the launch of Every-day: “Our pricing review campaign was planned months in advance.”
The FNB adverts show various fee options from the relatively expensive pay-as-you-use option to the relatively inexpensive electronic banking, suggesting clients can slash their fees.
An FNB press release issued on May 22 says banking can be inexpensive if you’re smart about it. It said FNB’s service charges would remain largely unchanged from July 1. “More than 80% of fees remain the same and prices that have been amended are predominantly below inflation.”
Mclachlan says fee packages can be “a dark and murky world”. He says FNB’s R75 electronic offering “excludes a bunch of fees” such as cheque payments, cash and ATM withdrawals, from other banks and balance inquiries.
He says Nedbank’s new fees are not a response to the Competition Commission probe (“we wish we could move that fast”) but part of an overall repositioning of the group and a drive to ensure it is competitive.
Mclachlan acknowledges that Nedbank pricing remains too complex and that some of its packages are expensive (one plan costs R250 for 35 transactions), but says these are used by only 2% of clients.
FNB Core Banking Solutions’ Janet Johnston gave three examples on how to cut fees:
- a R1 000 ATM withdrawal instead of using the branch will save 62%;
- an electronic payment of R1 000 is 37% cheaper than a cheque for the same amount;
- a R1 000 withdrawal at an FNB ATM rather than another bank’s will save 35%.
An analysis by Nedbank compared itself with Standard, FNB and Absa. This includes one over-the-counter (OTC) cash withdrawal, one OTC cash deposit, four ATM withdrawals, two Saswitch ATM withdrawals, one denied ATM transaction, two debit orders and one point-of-sale transaction. It shows Nedbank Transactor costs R69,55, Standard Bank E-Plan R89,24, Absa Flexi-save R115,35 and FNB Smart Account R127,12. This applies after the Nedbank fee changes to be announced this weekend.
A Competition Commission spokesperson says it is finalising the terms of reference and personnel for its inquiry into bank fees.