The circumstances that led to Nedbank’s loss of market share and the manner in which the retail business’s turnaround is being achieved offer compelling evidence of Nedbank’s significantly different profile within the South African banking landscape, says Nedbank Retail MD Rob Shuter.
Shuter was speaking at the public hearing of the Competition Commission inquiry into banking fees and market power, held in Pretoria on Monday.
“We face intense competition, not only from bigger banks but also from new entrants, including niche banks and retailers. Consumers have more choice than ever before and there is no doubt that competitive forces have had a strong hand in reshaping our business,” he said.
The fundamental change in Nedbank’s retail strategy has been underpinned by a comprehensive revision of its brand image, products and services; an ongoing reduction and simplification of bank fees; a substantial investment in expanding and improving the bank’s distribution channels, including automated teller machines; and a massive drive to improve service levels.
This turnaround strategy is paying dividends as Nedbank is succeeding in growing its primary client base and market share.
“In a competitive environment, one obviously takes account of the market position when deciding where to pitch an offering. It became clear that our high-value, low-volume pricing strategy, which was consistent with Nedbank’s status as a niche bank catering for a more affluent market, needed to change if we wanted to improve our relevance and appeal.
“Nedbank is committed to being a bank for all South Africans and, today, our fees are among the lowest in the market, particularly when it comes to entry-level banking products,” said Shuter.
He strongly endorsed the proposal by the Competition Commission inquiry’s technical team to introduce a switching code that would make it easier for clients to switch banks. The introduction of a switching code would provide a set of standard processes and guidelines for banks to follow when a client wishes to switch banks.
“A similar approach has been suggested in other countries,” he said.
According to Shuter, another significant barrier to switching is the Financial Intelligence Centre Act (Fica) process, which is complicated and onerous for clients. In this regard, Nedbank proposes the introduction of a centralised Fica repository that would allow for verification at an industry level.
“In other words, once clients have completed a Fica process at one bank, the data could be logged in a central repository so that they would not need to repeat the process if they decided to switch their account to another bank,” he said.
Included in Nedbank’s recommendations is the adoption of common terminology by banks to describe products and fees, making it easier for consumers to make comparisons across banks.
“In the same spirit, we recommend that a standard level of disclosure be applied whenever price comparisons are used in the public domain,” said Shuter.
A further recommendation by Nedbank is the introduction of an industry fee calculator, to be developed by an independent third party for use online. This is a different calculator from that proposed some time ago by the Banking Association and would enable clients to compare what they would pay at the different banks for their own preferred basket of transactions. — I-Net Bridge