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In the latest Solidarity Bank Charges Report, Paul Joubert of the Solidarity Research Institute notes that as the difference between the costs of the various banks’ offerings decrease, other factors will sway our choice of banks, such as rewards and the range of products offered.
Could this be a challenge for a bank like Capitec, which keeps its costs low by sticking to a simple fee model? Are people happy to pay more for the bells and whistles?
When it comes to the reward features offered by the banks, depending on your spending pattern and how many products you have with the bank, rewards can be attractive and can more than offset the bank charges.
However, it takes work on the part of the individual to maximise the rewards programme – and it rewards spending, not saving.
Banks also change the value proposition of their reward programmes, which can affect the overall value proposition.
Capitec follows a simple model of paying interest on the first rand in your bank account – so its reward system, one could argue, is based on saving and not spending.
According to Francois Viviers, marketing and corporate affairs brand manager at Capitec, 70% of the bank’s customers pay less than R50 a month on bank fees when you take interest into consideration.
Of its 7.3 million active clients, nearly 1.2 million earn more interest than they pay in bank fees.
As Joubert, who is clearly a fan of Capitec, argues, a customer can “earn significant amounts of usable funds [interest] by not doing anything special or qualifying for rewards such as spending the right amount of money on the right credit card. Capitec is simply rewarding the prudent behaviour of living within one’s means as no special effort is required.”
Viviers acknowledges that consumers enjoy reward programmes. However, at this stage, Capitec is not ready to consider such programmes.
“The average person already belongs to about nine reward programmes, of which they are only active in five.
“Reward programmes have to be managed to receive the best benefits and only benefit a small portion of customers,” says Viviers, who adds that if Capitec did decide to launch a reward programme, it would do it differently.
“We would try to make it as simple and clear as possible so you don’t have to spend time and effort managing your bank account, which will leave you with time to spend on other things.”
Another challenge to the simple Capitec solution is that the bank currently does not offer a full suite of banking products, such as credit cards, car finance and home loans.
Banks are taking advantage of this by offering reduced banking fees or higher rewards for customers who have several products with them.
Jan Moganwa, chief executive of customer solutions, retail and business banking at Barclays Africa, says: “By bringing their home loan, vehicle finance and investments to Absa, customers will derive full value and daily savings from their relationship with the bank.”
Although Capitec will be launching a credit card in the near future, home loans remain a challenge, despite its partnership with SA Home Loans to provide its customers with bond finance.
After the global financial crisis in 2008, the banks changed their home loan strategy to favour their own client base.
They realised the importance of knowing their customer and being able to track their banking history when issuing credit, which means one tends to get a better home loan rate from the bank you are with.
Ultimately, the best bank account is the one you use most efficiently. You need to decide if you are a reward fundi who is maximising reward programmes and transferring money into linked savings accounts for better interest rates, or if you are the more inactive banking client who wants banking to be as cost-effective and as simple as possible.
