Solidarity’s 2022 Bank Charges Report: New entrants turn market on its head

20 January 2022

The Solidarity Research Institute (SRI) today released its 2022 Bank Charges Report in which it is explained that this year online banks are the heroes in this sector.

Theuns du Buisson, economic researcher at Solidarity, explains, “It seems that a revolution is taking place in the banking sector in that Tyme Bank and Bank Zero offer the same services as traditional banks, but at a fraction of the price. 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 SRI explains in its report that although banks are increasingly competitive in terms of added value such as reward programmes, costs remain a determining factor. According to the SRI, it is also clear that competition in the banking sector is on the increase.

"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,” Du Buisson said.

With regard to the average middle-class consumer, Du Buisson says, “When looking at the accounts for middle-class banking needs offered by the traditional banks, FNB is 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. Standard Bank's MYMO Plus account takes second place, with an amount of R129,40.

“When discussing accounts for sophisticated banking needs, FNB also takes the honours with its FNB Fusion Premier account, with a total cost of R236 for our 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.”

The SRI also explains that with regard to 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.

Du Buisson explains that the methodology for this year’s report has been adjusted to keep pace with changes in consumer behaviour. “Following a survey, we also decided to adjust the list of transactions to include 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.”

“Amid above-average inflation, declining economic growth and uncertainty about the future, consumers do have a lot to be happy about with regard to their choices of banks. In general, the banking sector in South Africa remains incredibly competitive in several areas despite macro-economic pressures. Banks are increasingly differentiating themselves based on additional services. Yet it takes place in an environment where they are still competing with each other in terms of prices. The online banks’ entry into the market is another dynamic shift that the big banks must take into account. I would not be surprised if the new banks become big banks as well within a few years,” Du Buisson concluded.

Read the full report here.

Statement issued by Theuns du Buisson, Solidarity Research Institute: Economic Researcher, 20 January 2022