The Solidarity Research Institute (SRI) has published its latest Banking Charges report, showing how pricing at South Africa’s biggest banks compares, based on different user profiles.
For its 2021/22 report, Solidarity hailed online banks as the “heroes” of the year, noting that new entrants into the banking sector like TymeBank and Bank Zero are highly disruptive with zero-fee banking options and taking advantage of mobile technology to handle finances.
“It seems that a revolution is taking place in the banking sector in that TymeBank and Bank Zero offer the same services as traditional banks, but at a fraction of the price,” the research unit said.
“It will even be possible to do business at these banks completely free of charge if cash transactions and the sending of money to cell phone numbers are avoided.”
The group said that, although banks are increasingly competitive in terms of added value such as reward programmes, costs remain a determining factor. Here, it is also clear that competition in the banking sector is on the increase, it said.
“The new online banks, which compete purely on the basis of costs, are by far the overall winners when it comes to costs alone. A list of 25 transactions that would cost between R99 and R143 at the traditional banks, costs a mere R21.50 at Tyme Bank, or R25 at Bank Zero.
“Even when compared to the cheapest accounts of the traditional banks, those with branches, the traditional banks are lagging far behind,” Solidarity said.
Banking fees compared
Solidarity’s banking fee comparison is based on four different transaction profiles, split across four different groups. The 12 and 17 transaction profiles are most commonly associated with low-cost or entry-level banking; the 25 transaction profile aligns with middle-market accounts; and the 30 transaction profile for premium accounts.
The research unit said that for 2022, the methodology and profiles were adjusted to keep pace with changes in consumer behaviour.
“The list of transactions includes fewer cash transactions this year. These have been replaced with sending money to cell phone numbers, as well as internet transfers. The latter is now free of charge for all accounts, except for the very simple transaction accounts. At the two online banks, internet payments are also free of charge,” it said.
Among the traditional banks’ low-cost accounts, Absa and Capitec are the cheapest, with Absa charging a total amount of R37.10 for the basket of 12 transactions. Capitec, which charges 80c more at R37.90 is in second place.
“However, Capitec is the winner in the 17-transaction category with a total amount of R42.90 for that basket of transactions. FNB’s Easy PAYU account is in second place with a total of R54.45. Capitec is also the only one of the big five banks to offer interest on transaction accounts,” Solidarity said.
Middle market accounts
For the average middle-class consumer, typically covered by the traditional banks, FNB emerged as the overall winner with its FNB Aspire Current account.
“Like the other accounts in this category, it is a bundled account with a fixed amount which includes a series of free transactions. FNB is by far the winner in this category because all the transactions on our list are included in the fixed amount of R99,” Solidarity said.
Standard Bank’s MYMO Plus account takes second place, with an amount of R129.40.
For premium – or “sophisticated” banking needs, FNB also takes top honours with its FNB Fusion Premier account, with a total cost of R236 for the list of 30 transactions.
Absa Premier Banking takes second place with a total amount of R242.50.
“Both of these banks offer good value because the number of free transactions they offer is more than that of Nedbank and Standard Bank,” Solidarity said.
In the online/digital banking segment, only four accounts are covered: TymeBank, Bank Zero, Spot Money and Discovery Bank’s Gold account.
These banks are online only, with no branches. They also do not have large numbers of ATMs, with substantially fewer staff members than the traditional banks. This, in turn, should limit their costs to the consumer, Solidarity said.
“For these banks we have used the same list of transactions as for the 25-transaction profile, except that ATM withdrawals have replaced transactions at the counters of participating retailers.”
While Spot Money does offer banking services, its focus is on encouraging cash-free transactions and lacks many of the more traditional transactional services. Thus it was excluded from the final comparison, the group said.
Among the digital banks, Discovery stands out as being relatively exorbitant compared to TymeBank and Bank Zero – however, Solidarity noted that even at R90, it is still more affordable than many of the traditional banks’ offerings.