Posted by Londiwe Buthelezi | 22 May 2019 | 887 times
African Bank, the entity that has risen from the ashes of one of the biggest banking collapses in SA, has become the latest entrant in the fee war that is shaking up the industry.
The bank, which has attracted more than R1bn in deposits despite the harm the brand suffered due to the 2014 implosion, launched a zero monthly fee account on Tuesday that rivals TymeBank’s core “no fee” selling point and beats Capitec’s interest rates on money kept in a transactional account.
The new account, called MyWORLD, has been three years in the making and lets customers open up to five linked accounts with separate bank cards for their families, at no monthly fee either.
“There’s no question that bank fees have been very controversial in SA for a very long time,” African Bank CEO Basani Maluleke said during the launch on Tuesday.
“We will definitely have the cheapest transactional account of any bank out there, both the big incumbent banks as well as the new entrants,” said Maluleke. He said that African Bank compared its fee structure with the figures in the Solidarity Bank Charges report.
Maluleke said African Bank had re-established trust since the old bank was placed under curatorship in 2014 after collapsing under a mountain of debt.
At the time, the share price of parent company African Bank Investments Limited tumbled from R28 to just 31c before it was suspended on the JSE in August that year.
She said the bank wanted to rebuild and broaden its client base with this account.
“We definitely want to start by servicing our existing customer base very well.
“We want to drive penetration of MyWORLD account into that base. People in our current base typically have extended family obligations who will find the functionality beneficial,” she said.
The bank currently has just more than 1-million customers on its loans and insurance books, and they will be primary targets of the new account. The launch facilitated African Bank’s entry into the highly contested SA transactional banking space.
Three new banks that include TymeBank, Bank Zero and Discovery Bank opened earlier in 2019.
By introducing a zero monthly fee account, African Bank joins TymeBank in the banking price war and Nedbank, which also started rolling out no-fee accounts six months ago.
But it is going a step further by charging less on withdrawals from other banks and undercutting them on certain other fees. African Bank will be offering interest of 5.5% a year on money left in a transactional account, which is the highest available in the sector, as well as 6.5% on savings. Capitec offers 5% on money left in the transactional account and up to 5.6% on savings that are not fixed.
TymeBank still offers the best interest rate on savings though at up to 10% a year.
But because it does not charge monthly fees, African Bank will need to generate most of its profits from other activities. Furthermore, the group has to manage the expense of operating 394 brick and mortar branches, as well as the bank’s higher cost of capital due to the curatorship legacy.
“How we think we’ll make money out of transactional banking is from cross-selling.
“We already have airtime, electricity, data and our investment products are in there. Over time, people will be able to apply for loans from there. We’ll continue to add more products on the platform,” Maluleke said. (Business Day SA)
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