Absa, FNB shake off Capitec

CAPITEC, the country's newest bank, is losing its shine as the cheapest bank, according to the latest research by Solidarity Research Institute (SRI).

SRI's research suggests that FNB and Absa succeeded in replicating Capitec's offering with the introduction of FNB's EasyAccount and Absa's Transact.

Paul Joubert, SRI's senior researcher, said Capitec was facing greater challenges than it did a few years ago in terms of being innovative.

Capitec's executives have always been resolute about the idea of a single type of account for all its customers, while its rivals have different types of accounts depending on customers' income levels.

Riaan Stassen, Capitec's former CEO, has previously said: "I have yet to understand why [a high net worth customer and blue-collar customer] should pay different charges for using the facilities."

The Global One Account is offered to all customers with no segmentation by income.

This offering enticed more customers to open accounts with Capitec.

It claims to be still signing up about 100000 customers a month. Its rivals seem to have found that offering similar accounts has helped them to stem an exodus of clients.

It is not surprising that Capitec is not too enamoured with Solidarity's latest report.

It says determining the lowest cost in banking can be a complex and misleading exercise as it depends on transaction type and number of transactions.

Carl Fischer, Capitec's head of marketing and corporate affairs, said: "At the end of the day we believe it's about value offered and the understanding of the cost paid.

"We are satisfied that Solidarity has found us to be the lowest-cost account for several of its economically active groups for several years now."

Fischer poured cold water on the notion that its rivals have successfully replicated its low-cost offerings.

"Our value offer has never been about price alone. It's about simplicity, the support we give clients and the transparency of our pricing that allows clients to know what they get and know what they pay - and therefore feel in control."

He is adamant that Capitec's offer is "truly unique ".

The Stellenbosch-based bank is expected to report a 22% increase in interim earnings tomorrow.

Its closest rival, African Bank, has had to be bailed out by the Reserve Bank.

South African banks have been trying to reduce fees they charge customers following a two-year inquiry by the Competition Commission in 2006.

The regulatory authority appointed a panel chaired by Judge Thabani Jali, who concluded that South African customers paid the highest banking fees in the world.

One of the recommendations to come out of the Jali commission was for bank fees to be reduced.

Jo-Ann du Plessis, head of pricing and product at FNB, regarded as the one of the cheapest in the country, said: "We have been working hard to bring good value banking to the cost-sensitive market through our Easy Account."

Du Plessis also claimed that EasyPlan was not a new account and had been available at EasyPlan branches for the past five years.

EasyPlan branches had been a response to Capitec's rapid growth [as previously admitted by FNB's former CEO, Michael Jordaan].

Absa, which has had negative publicity over retrenchments, weak financial results, executive resignations and droves of customers closing accounts, fared well in the survey.

Arrie Rautenbach, Absa's head of retail banking, said: "If one excludes the impact of large balances, we are delighted that Solidarity's report shows Absa Transact as the best-priced offer," Rautenbach said.

Standard Bank's AccessAccount is more costly compared to Capitec, FNB and Absa. It is also the most expensive in the middle-income segment.

However, competition in this segment is no longer driven by the lowest cost but rather by the additional features such as loyalty rewards.

Joubert found that competition for middle-income earners has remained stagnant at a monthly fee of R100.

His report revealed that Nedbank - which previously had an image as the bank for the wealthy - has the cheapest offer, the Savvy account.

Rautenbach said customers have become more price conscious and are more empowered with sources such as the internet and social media to keep abreast of which bank will offer them the best value for their money.

He said that studies such as the Solidarity report made it easy for customers to get a sense of their options when it came to banking products.

Rautenbach effectively supported Joubert's comments that informed customers are the best regulators of bank charges.