Solidarity’s Research Institute has published its latest Banking Charges report, showing which are South Africa’s cheapest and most expensive retail bank accounts across different income groups based on a specific number of transactions.
As with previous years, Solidarity based its research on transaction profiles, which fit different types of banking clients across income groups.
The profiles are split across 12, 17, 25 and 30 transactions, with the 12 and 17 transaction profiles suited to low-income earners, the 17 and 25 transaction profiles suited to middle income earners, and the 25 to 30 transaction profiles suited to higher income earners.
According to Solidarity, the transaction profiles are built around the banks’ own push to make banking simpler and more digital, with trips to the branch and usage of other banks’ ATMs not taken into account.
Different for 2018 is the removal of card swipes, as these transactions are free at the banks now – as well as the removal of subscriptions to SMS notifications and internet banking as this, too, is free.
This is how the banks performed:
Low income, basic banking
“Competition amongst lower-income banking accounts is intense, as has been the case the last couple of years. All the banks want to expand their market share in this segment,” Solidarity said.
“Absa and FNB have closely copied Capitec’s offering. Standard Bank and Nedbank have experimented with somewhat different styles of accounts, but both are now offering products that closely resemble the others in this segment.”
The main difference between Capitec and the other banks remains the fact that only Capitec pays significant interest on any balance kept in the main transactional account, the group said.
Of the five big banks, Absa still has the cheapest offering for a PAYT account, although only marginally beating Capitec. Old Mutual competes very well in the transactional space, coming in as the cheapest when no interest is considered.
Capitec, however, will be the cheapest if a balance of only R222.68 (12 transactions) or R192.,98 (17 transactions) is maintained in the transactional account.
“The one offering both Old Mutual and Capitec lack, however, is the option of sending money via their own platforms. The absence of this functionality might put customers off their offering,” the group said.
Middle income, moderate banking
This category comprises many of the banks’ flagship accounts.
“Old Mutual has been excluded from this point onwards, since middle-class customers would most likely be averse to banking with a less well-established bank. However, Old Mutual still offers a good value proposition for a middle-class customer, if they should wish to venture outside the traditional top five banks by transactions,” Solidarity said.
Although Capitec is the hands-down winner when only fees are compared, there are some caveats, as Capitec offers no loyalty programme, and customers who wish to send money via instant payment services (eWallet, CashSend, etc) would have to queue at a participating retailer.
High income, intense banking
These accounts are marketed to the higher middle class, and excludes Capitec, which does not offer a similar level account.
In this assessment, Standard Bank offers a rebate option for maintaining a R10,000 balance in your transactional account.
However, it must be noted that since these funds would earn no interest, the foregone interest (4.85% at Capitec) has been used as an additional cost on the rebate option, Solidarity said.
“Without the requirements for minimum funds in a transactional account, however, Nedbank’s Savvy Bundle tops this category – competition is active, since all the other options are within R30 per month of one another. This means that the choice would most likely boil down to access to rewards programmes and other extras,” the group said.
According to Solidarity’s findings, Capitec is the cheapest account “for anyone who keeps an average balance of a couple of hundred rands in their account”. The group’s simplified approach to banking, and interest payments that will eat up the monthly costs, would make it top choice for most of the population.
For middle-income groups, while Capitec still offers significant value, it is limited by no rewards programme that middle class users may desire. Here, FNB works out to be the most affordable option, Solidarity said.
At higher incomes, Standard Bank’s Prestige Rebate Account offers a good value proposition, Solidarity said, so long as customers are comfortable leaving R10,000 or more in the account at all times.
On pure fees, the Nedbank Savvy Bundle is the cheapest.