FNB offers by far the most cost effective way for consumers to draw cash and is leaving other banks behind in a drive to deliver affordable cash options to the mass market.
By drawing money from certain retail outfits, FNB customers can draw cash for a flat fee of R1,75, slashing ATM costs by two-thirds.
The world may be moving to a cashless environment, but in reality cash is still king and cash withdrawals are one of the most expensive banking transactions.
FNB has proposed that Saswitch fees be removed, which would save consumers about R500-million a year. But there is already a cheaper way of drawing money.
“Cash back” is available at most major retailers and allows customers to use their debit cards to draw money. By using the infrastructure of the retailer, banks can offer substantial savings to clients if they choose to. Because the retailer is providing a service for banks there is no interchange fee, says Galia Durbach, payments executive for FNB.
Moreover, the merchant receives a small fee from the customer’s bank for providing the service. There is a major cost saving to the bank because transporting cash to ATMs is expensive as a result of increasing crime levels.
Durbach says cash back increases accessibility and affordability for mass-market clients. Considering that an FNB customer would pay R5 to withdraw R500 from an FNB ATM and R10,75 from another bank’s ATM, the R1,75 charged to withdraw from a retailer is a substantial saving.
Absa says it recognises the need to offer discounted fees at retailers for mass-market customers, but not its higher income earners. “We realise that it is important to keep banking affordable to these customers and that they do not necessarily have access to an Absa ATM. For this reason we have kept a differentiation on the pricing for these transactions on our mass-market accounts. For accounts in the higher income categories we believe that using the merchant to withdraw cash is a factor of convenience and we wish to encourage these customers to use more sophisticated payment mechanisms like debit/credit cards,” says Errol Smith, Absa’s group media manager.
Absa charges its Mzansi clients R2,30 for a cash back, compared with an ATM withdrawal of R3,25. While this is a 30% discount it is still not as affordable as FNB’s cash-back fee. It also offers a discount to FlexiÂSave customers, charging R2,30 then an additional R1 per additional R100 withdrawal. So a withdrawal of R500 would cost R6,70. Absa charges other account holders the same for cash back as an ATM withdrawal.
Nedbank claims it encourages customers to use debit cards to draw cash with its cash-back fee, which is 33% less than the ATM fee. But according to its website, customers pay the same fee to draw money at Pick ‘n Pay as an ATM.
Standard Bank does offer a marginal discount with E-plan customers paying R4,05 for a cash back compared with R4,90 at a Standard Bank ATM. Current-account holders pay R5,75 to draw R500.
Though cost efficiencies vary between banks, cash back could still offer significant value compared with drawing money from another bank’s ATM — about R6 over and above the normal withdrawal fees and generally not included in bundled fee options.
One negative of cash back is that the banks prefer customers to make purchases using their debit cards when drawing cash. There is a concern that merchants could drive more business to cash backs to cash in on the merchant fee and avoid the fees banks charge merchants when customers use their debit cards. Cash back is only available on debit cards and not credit cards because of the higher risk of fraud.