Power surge ignites the banking war

Standard cuts fees as FNB services go on the blink

Poor Michael Jordaan. The chief executive of First National Bank (FNB), fresh from signing up more than a million new accounts on the back of a high-tech marketing campaign, got hit by a City Power thunderbolt.

A power surge on Tuesday blew FNB's computers offline just as the bank began to herd its new customers towards its new offerings, including banking apps, cheap iPads - and lightning-quick service.

The bank's clients could not use any of the banking platforms - not even ATMs to withdraw cash.

Just as the bank was trying to pick itself up with the aid of stuttering generators, rival Standard Bank waded in to offer half-price bank fees on its forthcoming "Continuum" account. The bank wars had officially begun.

FNB immediately laid a complaint with the Advertising Standards Authority (ASA), claiming Standard was selling "non-existent products", since the special offer kicks in only on April 2.

Standard complained to the ASA last month about FNB's claim that it is the only bank to offer an account with no management fees. Standard put forward as evidence its fee-free Mzansi a ccount and mobile banking.

FNB, under Jordaan's hand, has pushed the marketing envelope with its "Steve" campaign on radio - which the bank's boss credits with having attracted 1.2million new accounts.

Jordaan has also used Twitter to try to capture the imagination of young people.

Jordaan stops short of attacking his competitors. As a rule, he said, "we focus on our strengths and value to customers. We would not get involved in a twit for twat response with a competitor."

Marketing analyst Chris Moerdyk said Jordaan clearly understands the power of social media. When FNB went off-line for several hours, Jordaan tweeted that he was cancelling his appointments and on his way to Randburg to sort things out.

"The full extent of the potential bad publicity was nipped in the bud," said Moerdyk.

Jordaan said Twitter has become "a fully operationalised customer service channel, alongside branches and call centres. It still surprises many customers when they tweet something about us and we respond with an answer or an offer to help."

Throughout the bank battles, media owners have been smiling. Neilsen research rates banking as the fourth-biggest spender on advertising after retail, travel, transport and leisure, and business-to-business.

Standard Bank spent R381-million on advertising last year, followed by FNB at R372-million, Absa at R259-million and Nedbank at R259-million.

Jacqui Carnelley, marketing director for personal and business banking at Standard, said the bank would not try to capitalise on FNB's problems.

She said the price reduction announced by Standard was in no way linked to the advertising spat. It had been months in the planning.

Absa and Nedbank appear slightly bemused by their competitors' actions.

Absa deputy CEO Louis von Zeuner conceded that "life is returning to the consumer market". He said a price war is unsustainable and his bank will offer "a mix of affordability and value for money".

"This does not mean we increase marketing spend, however, it does call for more effective use of the spend."

Anton de Wet, managing executive of client engagement at Nedbank, said his bank will follow what clients want rather than what competitors are doing.

Peter Schlebusch, CEO of personal and business banking at Standard Bank, said his operations are unlikely to suffer from a power surge. "We have back-ups for back-ups," he said.

Although Standard will lose about R500-million in revenue with its half-price Continuum account, Schlebusch believes it is worth it.

His strategy is to use simplified products to secure more customers, who will then go on to use other services at the bank. Standard opened 1.3million new accounts last year and Schlebusch admits to having taken off the marketing gloves.

Local lenders are in an all-out fight for greater share of the previously underserviced unsecured lending space - crowding out early leaders Capitec and African Bank.

Standard Bank's slashing of fees came weeks after Finance Minister Pravin Gordhan's budget speech, in which he called for lower banking costs and the introduction of "more appropriate and transparent saving and investment products, including annuities".

According to the Falkena Report, a 2004 inquiry into the banking industry, local banks charge far more for service than their international counterparts.

Banks have been slowly introducing products that enable customers to bank for free. In Standard Bank's case, self-service banking increased by 12% last year, while in-branch fees remained flat - despite an increased customer base.

Schlebusch said the number of payments through electronic channels is 25 times greater than payments through the branch network.

Nesan Govender, an executive at Accenture SA, said banks are being forced to offer "more simplicity in the customer experience". He expects banks to further reduce fixed and operating expenses.

From a liquidity perspective, local banks need to focus on the structure of their liabilities to ensure that their balance sheets meet criteria of the net stable funding ratio in Basel III requirements.

To achieve this, banks need to grow retail deposits.