The retail banking industry in South Africa is a highly
competitive market. The depressed credit market coming out of the
financial crisis of 2009 has resulted in local banks embarking on a
more focused undertaking to increase revenue - either through
increased growth into the 'high-risk high-return' market of
unsecured lending, or supplementing the low growth in interest
income with other fee income.
The unsecured lending market has been shrouded with allegations
of reckless lending practices that are non-compliant with the
National Credit Act (NCA). In particular, the
in-duplum rule and coupled with increased provisions, as the
over indebtedness of customers starts to rear its ugly head and the
serviceability of loans comes into question. Not surprisingly, the
major banks are moving away from this market. Amendments to the NCA
are expected to further curtail growth as fixed-cost structures and
credit amnesty are introduced.
With the departure from the unsecured market, banks are striving
to grow customer volumes and to generate fee income through
services (card fees, administration fees, transaction fees).
FNB is one case in point - through a digital media strategy
including social network marketing or above the line marketing -
the bank is clearly on an aggressive customer campaign. On the
other hand, Standard Bank has taken a different approach with
the recent introduction of UCount Rewards, the bank's loyalty
programme, offering attractive incentives to clients.
These two banks have identified that customers are no longer
only focused on traditional banking products but, the
value-add that they receive hassle-free.
The flow of customers from one bank to another is also dependent
on the ease with which a customer can open a new account or switch
an existing account. The banking industry in the United Kingdom
(UK) recently launched new switching rules aimed at making
their retail banking sector more competitive by allowing
customers to switch more easily between banks.
The latest rules aim to cut the transfer time from up to a
month, down to seven days and oblige the bank to oversee all
incoming and outgoing payments. Ahead of the launch, UK banks have
started to roll out new incentives to woo customers.
Yet, with all these added benefits and increased service, the
question still remains around the affordability and competitive
nature of banking fees in South Africa. While the country has a
mature financial services industry, the relative monopoly that the
four big local banks operate has not allowed or made it viable for
foreign branches to open retail banking operations on our shores.
While Capitec has started to eat into the customer base of these
four, based on their simple banking fee structures catering to the
lower end of the market, banking fees are still considered
relatively high when compared to developed markets.
Time will tell whether or not the banks will start a price war
to gain clients - Although with the value-add that banks are
marketing to customers, banking costs may still remain low on the
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