By Thapelo Molefe
South African banks are locked in an increasingly intense competition for customers, with lower transaction costs and added perks emerging as the latest weapons in the fight for market share.
The Solidarity Research Institute’s (SRI) latest Bank Cost Report reveals that banks are not only reducing fees but also introducing new features to attract consumers.
The study, which evaluates ordinary transaction accounts accessible to the public, found that charges have decreased across the board, with banks aggressively vying for customer loyalty.
The report released on Thursday primarily focuses on the five major banks – Absa, FNB, Standard Bank, Nedbank and Capitec. It also includes online competitors TymeBank and Bank Zero.
One of the most significant changes highlighted in the report is the transformation in instant transfers between different banks.
The introduction and expansion of PayShap has been a game changer, allowing free transactions under R100 when using a ShapID.
“The PayShap transfer feature allows free transactions to almost all banks where the transfer amounts to less than R100 and where the consumer has set up a ShapID. This reduces the need for the use of cash for smaller transactions even more,” said SRI economic researcher Theuns du Buisson.
This move has forced banks to reassess their instant transfer fees.
One of the most notable developments in the banking sector has been the rise of PayShap, which also allows instant transactions of up to R50,000 between different banks at lower costs.
“Last year, the limit for PayShap transfers was increased to R50,000 with the result that many banks now regard it as a replacement for instant transfers,” Du Buisson noted.
“In most cases, the banks have therefore reduced their own charges for instant transfers so that the charges could be the same as PayShap charges.”
Digital banks are leveraging their cost advantages to challenge traditional banking models.
TymeBank leads the online banking segment with free PayShap transfers and cellphone-based money transfers, while Bank Zero pushes the boundaries by offering free airtime and electricity purchases.
“The main factor determining the winner in the category for purely online banking needs is the number of free transactions granted,” said Du Buisson.
“In this regard, TymeBank is the clear winner, as PayShap transactions are free of charge and money can easily be sent to a cellphone number.”
For middle-income customers, affordability and rewards play an equally important role.
Capitec offers the lowest monthly transaction cost at R107.50, but Nedbank’s Migoals Plus account, at R110, provides additional benefits that may be worth the slight price difference.
“Capitec is the cheapest at R107.50, but for only R2.50 more, Nedbank’s Migoals Plus account offers significantly more added value and is regarded as the most cost-effective option in this segment,” Du Buisson explained.
“This market shows that looking purely at cost is not always the best indicator of value because rewards programmes and other benefits are important to consumers.”
The report noted that higher middle-class banking customers who make around 30 transactions per month are drawn to premium benefits such as airport lounge access and linked credit cards.
“Nedbank’s Migoals Premium account is the most cost-effective account at R240 per month, with FNB’s Fusion Premier and Absa’s Ultimate Plus as strong competitors,” he said.
“The market has become more competitive with few major price differences, making it easier for consumers to compare benefits such as airport lounge access, linked credit cards and 24-hour banking services.”
With banks intensively competing for business, the biggest winners are consumers.
Lower transaction fees, enhanced services and better rewards programmes mean that customers have more choices than ever.
“Each bank tries to meet different consumer needs, and consumers must decide which options best meet their needs,” Du Buisson concluded.
“Clients are, however, encouraged to determine for themselves whether the extra benefits justify the higher costs.”
Whether choosing a traditional or digital bank, South Africans now have more options. By carefully evaluating costs and benefits, they can make informed choices that suit their financial needs.
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