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Cheaper inclusive banking in SA

Having a state bank is not a sustainable solution – Adam Ikdal from Boston Consulting.

NASTASSIA ARENDSE:  There are some perceptions out there about excessively high bank charges that people have had over the years, which have driven some consumers away from the traditional big four retail banks to the upstart, Capitec. But it seems, though, the big four are fighting back.

Read: SA’s cheapest bank account

I’m joined on the line by Adam Ikdal, who is a senior partner and managing director at Boston Consulting Group. Adam, thank you so much for your time.

ADAM IKDAL:  Pleasure, Nastassia. Thank you for having me.

NASTASSIA ARENDSE:  I’ve read your financial inclusion report that you published earlier on in the year, and that takes a look at one of the aspects of this, the high bank charges, which is the reason why we don’t have as much financial inclusion.

But then I wonder – from your discussions and research, do you get the sense that some of these banks are really clawing back some of the market share that they may have lost to Capitec as a result of these perceived high bank charges?

ADAM IKDAL:  Yes, we do. The big four banks are trying to claw back market share, and indeed are dropping the charges or some elements of their charges. But if you look at the combined average account fees even after the charges are dropped, still you would see start-ups like Capitec being significantly cheaper on average than the big banks.

NASTASSIA ARENDSE:  In terms of the inclusiveness, I’ve heard many advocating to have a state bank. They talk about how the Post Office can eventually be able to take over some of the issues that we are having when it comes to financial inclusion. Is that a part that you are seeing as well, where a state bank could be able to step in?

ADAM IKDAL:  No, we don’t think that’s a sustainable solution. We think that the only sustainable solution is for banks to have an operating model where they can actually make money on the low-income segment. They think making it a state-owned entity will eat up the solution. We think that existing banks need to find leaner and cheaper operating models to reach this part of the segment.

NASTASSIA ARENDSE:  Towards the end of your report I remember reading a part where you do map a way forward in order for us to be able to have more financial inclusion locally. Take me through some of the other ideas that you bring forward in your report.

ADAM IKDAL:  Importantly, we think regulators need to come to the table. If you look at the strict compliance rules and consumer contextual rules that we have, it’s almost prohibitively expensive to bank the low-income segment. So regulators would be an important part of it.

We think the existing players need to look at new digital models through smartphones and other technologies to reach this segment.

And we also think we need to have cooperation – some of the more informal lenders and the financial institutions today, even partners like stokvels and other informal mechanisms. So all participants need to be involved.

NASTASSIA ARENDSE:  Adam, thank you so much for your time.

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