Nedbank and online auction site Bidorbuy are offering local investors the opportunity to bid on interest rates for fixed-term investments.
Bidorbuy (www.bidorbuy.co.za) is exclusively hosting a reverse auction on its site where investors can bid for interest rates on fixed-term investments of three, six, nine or twelve months.
Taking the form of a reverse auction, the reserve interest rate starts at 11%, decreasing by 0.25% per bid.
In the case of a reverse auction, the lowest bid normally wins. However, Colin Donian, senior manager of Wealth Creation and Preservation at Nedbank, says the decision as to who secures the investment will be judged on a combination of who has the lowest rate, the highest investment sum and the earliest bid.
This effectively means Nedbank can decide to offer the rate to a range of bidders, rather than awarding the auction to one bidder.
Potential investors must have between R5 000 and R200 000 to invest and will have to process the investment application at a Nedbank branch within 72 hours of having their bid accepted.
Donian says while Nedbank wanted to make the investment fully electronic, current legislation and new money laundering laws made it necessary for a physical transaction to take place.
This kind of auction has been occurring internationally for some years, but Donian says it is a first for the South African investment community. The offer will run in three blocks, the first of which ends on 29 October and the last will end on 12 November.
A look at the Bidorbuy site shows bids for the 12-month fixed-deposit investment currently at 10%, while the three-month investment rate is at 9.50%.
By way of comparison, Donian quoted findings from the Financial Mail on 26 October, which placed the 12-month fixed deposit interest rate for first tier banks at 8.12%, while second tier banks are offering 8.83% for the same period.
Donian explained the reason for Nedbank`s decision to go with the reverse auction as an effort by the bank to increase its brand awareness.
"We are not so much targeting our existing clients, as looking to leverage off Bidorbuy`s current users of around 160 000 to attract new clients."
Donian says Nedbank`s existing clients are extremely Net-savvy, with between 30% and 40% using the Internet on a daily basis, making the online auction a natural choice to attract further customers.
Depending on the success of the auctions, Donian says the bank may well offer the service again, possibly with a higher investment option.
Other banks offering the same kind of auction facility can be viewed at www.pncbank.com and www.cdenergy.com.
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