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Banks freeze, cut entry-level fees

While monthly gold and platinum-level account charges rise marginally.

Mounting competition in the consumer banking space, particularly in entry-level banking, has seen banks across the board freeze or even cut the monthly fees on these accounts.

Absa is the latest to reduce its monthly fee – its Transact account will cost R4.90 in 2020, from R5.30 now. In absolute terms these are not big numbers, but this is a segment of the market that is very price-sensitive, and perception plays an outsized role.

Nedbank, after dropping the monthly fees on its Pay-as-you-use account in April, will continue to offer this and its MobiMoney (wallet-type) accounts on this basis next year. Standard Bank has also not increased the monthly fee of its new MyMo account (R4.95) for 2020.

From July, FNB cut the monthly fee of its Easy pay-as-you-use account to R4.95 and has recently rebranded its free eWallet eXtra account to Easy Zero. Perhaps the most significant move this year was the decision by Capitec Bank to reduce the monthly fee of its Global One account by 14% to R5.

These moves follow the disruptive entry of TymeBank, which marked the first time a bank centred its core proposition on a full bank account with zero monthly fees.

TymeBank per-transaction fees are also simple to understand and very competitively priced. In fewer than eight months, TymeBank has signed up 1 million customers.

Monthly fees – entry-level bank accounts

   

2019

2020

Change

Absa

Transact

R5.30

R4.90

-8%

Capitec

Global One

R5.80

R5

-14%

FNB

Easy Zero (previously eWallet eXtra)

No monthly fee

 

FNB

Easy pay-as-you-use

R5.75

R4.95

-14%

Nedbank

MobiMoney

No monthly fee

 

Nedbank

Pay-as-you-use

No monthly fee*

 

Standard Bank

MyMo

R4.95

R4.95

0%

TymeBank

 

No monthly fee

 

* R5.50 until April 2019

There is more price elasticity the further you move upmarket into bank accounts targeted at middle class consumers, and fees tend to cluster around three price points. The first – R60 – is for bundled no-frills banking, with so-called ‘gold’ accounts hovering around the R110 mark while what used to be called ‘platinum’ accounts are around the R210 level.

Monthly fees – mid-level bank accounts

   

2019

2020

Change

FNB

Easy Smart

R65

R59

-9%

Nedbank

Ke Yona bundle

R58

R62

7%

         

Absa

Gold Value

R107

R109

2%

FNB

Gold Unlimited

R105

R109

4%

Nedbank

Savvy Plus

R110

R115

5%

Standard Bank

Elite

R105

R107

2%

         

Absa

Premium bundle

R179

R190

6%

FNB

Premier bundled

R209

R219

5%

Nedbank

Savvy bundle

R200

R210

5%

Standard Bank

Prestige

R205

R209

2%

FNB cut the monthly fee of its Easy Smart account by 9% in July, while Nedbank will increase the price of its Ke Yona bundle by 7% from January.

There is not that much room to move on pricing in the middle segment. Absa and Standard Bank will increase the monthly charges of their Gold Value and Elite bank accounts by just 2% next year, while Nedbank’s Savvy Plus account is up by 5% to R115.

In the upper middle segment, banks have the most pricing power. Standard Bank’s Prestige bundle will be 2% pricier from January, while Absa’s Premium Bundle and Nedbank’s Savvy Bundle are up 6% and 5%, respectively. FNB increased the price of its Premier Bundle by 5% in July.

Read: Discovery Bank’s complex pricing

In April, this writer argued that “many readers of this site don’t particularly care whether their banking costs them R4 or R400 a month. But the real battleground is for the millions of underbanked customers (with pensioners as an – unintended? – secondary market for these ultra low-cost accounts)”.

With Old Mutual and African Bank already playing in the transactional space, Bank Zero launching early next year, and Post Bank still to enter the fray, the market is going to be significantly more crowded.

Read: Women pay 18% more in banking fees than men, research finds

 

 

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A very interesting pricing review. Data costs work in reverse of pricing in banking. It is the low end that are charged the highest rate.

Capitec’s Global One could easily slot into the “Mid-level bank accounts” table, and at R5.00 per month, it’s way ahead of the others in terms of ease of application, utilisation, other charges and interest on balance.

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