South Africa: Banking Enquiry Report Released

Last Updated: 18 September 2008
Article by Geoff Parr

The Competition Commission released a 44-page executive summary of the Banking Enquiry Report at a press conference in Pretoria on 25th June. The full report runs to 588 pages, but will only be released (in a sanitised form) once the banks have had a chance to remove confidential information or to waive their confidentiality claims. The Enquiry was conducted on behalf of the Commission by a Panel chaired by Judge Jali, assisted by a Technical Team, and primarily addressed bank charges, access to the payments system, and interchange. 267 submissions were received, 151 from stakeholders. There were 21 days of hearings during the two-year Enquiry.

The executive summary of the report contains "findings" and a set of 28 "recommendations", for implementation by the Commission, the South African Reserve Bank (SARB), National Treasury, the banks themselves, the payment card associations, and bodies such as the Payments Association of South Africa (PASA), the Banking Association and the Banking Ombudsman. Some of the recommendations call for immediate action, while others require action over the next one to three years. While there is no unequivocal recommendation for the Commission to initiate complaint proceedings, it is not clear whether the Commission should consider initiating investigations into interchange in the EFT and EDO (early debit order) payment streams, or whether the Commission should first establish whether interchange in these payment streams is really necessary.

Recommendations of the Report

Capping of penalty fees

The first recommendation is the only one for explicit price regulation: the capping of the penalty fee on dishonoured debit orders to "approximately" R5 per item. Throughout the Enquiry, the Panel challenged the cost basis of penalty fees, and took the view that the banks should not use penalty fees to "teach their customers manners". The cap would have to be imposed by the SARB or according to the Consumer Protection Act once it is passed.

  • The penalty cap sounds good for consumers but would mean that the banks would not only lose a significant source of revenue, but would face higher incidences of dishonoured items, as consumer behaviour is driven by costs. Compliant customers would have to bear relatively more of banks' total costs.

  • A penalty cap was not mooted at any time during the Enquiry and the level seems not only arbitrary, but very low in comparison to, for example the UK, where there is a cap of GBP12 (about R190).

Cancellation of debit orders

The second recommendation is that customers must be able to cancel debit orders at any time by telephone, internet or over the counter.

  • This also seems appealing at first glance but is surely open to abuse by consumers wishing to avoid their obligations in underlying contracts with creditors.

Abolition of ATM carriage fees

The third recommendation is for ATM interchange (carriage fees) to be abolished in favour of the direct charge system, whereby customers are charged for ATM transactions by the ATM provider rather than by their own banks, although their own banks will also charge them processing fees.

  • The direct model was proposed by FNB and has found some support among the banks. It should promote more competition on ATM withdrawal fees.

  • The fifth recommendation is for no price discrimination among ATM customers of other card issuers, in order to prevent strategic, exclusionary pricing targeted against smaller players.

  • The seventh recommendation is that in time, the direct charge model should be extended to mini-ATMs and cash-back at point of sale.

Regulation of interchange

Recommendation eight is for the establishment of an independent regulatory process for the determination of interchange, where the SARB is proposed as the appropriate regulator.

  • The banks largely agreed with this approach during the Enquiry, but the recommendation includes the stipulation that the regulator should begin by establishing the validity of interchange in each payment stream, whereas it seemed the Enquiry had already established the legitimacy and necessity of interchange, at least for credit, debit and hybrid cards.

Payment card scheme rules

Recommendations 9 to 11 are for changes to the card schemes' rules. Acquirers should not be required to be deposit-taking institutions, nor should acquiring be restricted to institutions that issue scheme cards. The card schemes should withdraw their prohibitions on "pure" cash-back at POS (without any other transaction being undertaken), and to eliminate their "honour all products" rules.

  • The banks (and the SARB) might be worried that non-bank acquiring would lead to disintermediation, but pure cash-back ought not to be a problem for banks to implement. The card associations would presumably prefer to keep their honour all products rule, because it forces merchants to accept the more costly credit cards, even if they would prefer only to accept debit cards.

Electronic funds transfers and early debit orders

Recommendations 12 to 14 concern interchange on EFT and EDO transactions, where the Panel has not yet recognised the necessity for interchange. The recommendations are not clear, but they seem to contemplate investigations by the Commission into collusive practices in respect of EFT interchange, and excessive pricing in respect of EDO interchange. Alternatively, they envisage the determination of interchange in the EFT and EDO streams being included in the proposed regulatory process.

  • Concerning EFT, it is odd that although the Panel acknowledges the two-sided nature of the market, nevertheless it sees no need to reconcile the demand/supply imbalance on either side by means of an interchange payment.

  • Concerning EDO, the suggestion of an investigation by the Commission into excessive pricing is surprising, especially since the Panel did not establish that any bank holds market power or is dominant in any market, never mind "super-dominant" as required by the Competition Tribunal in its Harmony/Mittal decision.

Access to the payments system

Access to the payments system by non-bank participants is covered by recommendations 13 to 19, and here the Panel relies on securing the co-operation of the SARB to revise the National Payments System (NPS) Act and to establish a payments system Ombud. The Panel also recommends that the entry of new participants be decided by the CEO of the payments association, rather than by incumbent members.

  • The proposals here are rather vague and dependent upon the SARB for action that is not clearly spelt out.

Measures to increase price transparency and comparability and to ease switching

Recommendations 20 to 28 of the Report concern the disclosure of product and price information, the use of standardised and plain language terminology, the encouragement of consumers to switch to more cost-effective options, the establishment of standard customer profiles to facilitate comparative shopping, the easing of the law against comparative advertising, the establishment of a centralised fee calculator, a central FICA info hub, and a switching code, and the expansion of the Banking Ombudsman's duties to include enforcement and monitoring of compliance with the codes of conduct for information disclosure and switching.

  • Although the cost of switching was addressed during the Enquiry, the adoption of standardised language was not discussed in any detail. More importantly, the risk of collusive conduct and the stifling of innovation resulting from standard customer profiles and standard basic banking products were raised by the banks and acknowledged by the Panel during the Enquiry, but seem to have found their way into the recommendations all the same.

  • The proposal for a central FICA hub seems sensible, but like so many of the Panel's recommendations, will cost money to establish, money that will be paid by the banks and recovered from customers, and money that might constrain the ability of the banks to reduce their charges in total.


The full Report of the Banking Enquiry is yet to be published, and only then can the implementation of the Recommendations begin, which itself will be a process that will take at least three more years to complete. Apart from the reduced penalty fees (charges that many customers will never pay), it is difficult to see how the recommendations will lead to a reduction in bank charges, particularly considering the additional, costly measures proposed, including codes of conduct, switching codes, standardised products, additional disclosure, fee calculators, an additional Ombud, interchange forums, and completely revised ATM charging systems. Banks – and ultimately consumers – will have to bear these costs.

It remains to be seen how hard the Commission and the SARB will push for the implementation of the various recommendations, and to what extent the banks will be willing participants in complying with selected proposals, many of which seem to rely upon assertions rather than "findings" of market power and dominance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.