As the Jali commission into banking fees continues, First National Bank (FNB) announced recently that it would be offering free banking on some of its services.
FNB has already set the cat among the pigeons at the hearings by suggesting the removal of Saswitch fees on ATM transactions.
Over the past year, banks have been reducing their fees in an attempt to become more competitive and appease a very annoyed public. The only way banks can meaningfully reduce bank charges and still keep shareholders happy is to keep people out of their branches.
“If customers move to the more cost-effective electronic channels, we save on costs and we can pass them on to customers in lower prices and even free transactions,” says James Fowle, FNB’s pricing executive.
So it makes sense that FNB is on a drive to keep people out of high- cost branches by creating financial incentives. To this end, all cellphone banking and telephone banking transactions will be free, as will be the purchase of prepaid airtime and electricity, ATM balance enquiries and ATM cash deposits.
According to Fowle, in 2003 FNB dropped the subscription fees to all electronic services including internet banking, but they are now taking it one step further by abolishing transaction fees for cellphone and telephone banking.
Fowle says this decision was taken because more people have access to these mediums than they do to internet banking, which will still carry transaction fees. Cellphone banking also remains a far safer option in terms of avoiding fraudulent transactions, which no doubt saves the bank money.
While making ATM cash deposits free and keeping ATM cash withdrawal charges unchanged, FNB has increased fees on cash deposits and withdrawals at branches. Overall fee increases have been limited to 2,2%, with increases on monthly account fees and branch transactions being offset by free services and other reduced fees.
FNB has also reduced its annual card fee. The potshots Virgin Money has recently taken at their competitors may have prompted FNB to rethink its strategy. Firstly, FNB has standardised the annual card fee across all cards, so you won’t pay more for a gold card, which Virgin Money pointed out provided little additional value. The flat annual fee across all cards is now R155, but customers who sign up for the electronic service offering will only pay an annual card fee of R99.
This offer means that customers can receive their statements by email, pay their monthly instalment electronically and sign up for inContact. As Fowle points out, these measures save the bank money, especially inContact, FNB’s free anti-fraud system, which sends SMS messages to customers informing them of any transaction going through their account.
What is interesting is that FNB has decided not to charge the monthly overdraft fee on existing loans — as permitted by the new National Credit Act (NCA). The NCA has allowed a monthly overdraft fee as an offset to the removal of penalty fees for late payment. Banks recently discovered that clients are resentful when fees are unilaterally imposed on them and they tend to flock to the media to complain.
FNB is looking to avoid this bad press by applying a monthly fee only for new loans after June 1, when the NCA comes into effect. Fowle says new loans issued after June 1 will contain all of these costs in a transparent manner and will be agreed by the client upfront.
Consumers can look forward to the new price announcements of other banks as they come up for revision during the year.