Digital banks charge customers less, research shows

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TymeBank and Bank Zero, the new digital banks, emerged as winners of this year’s Solidarity Research Institute (SRI) bank charges study, which provides a comparative analysis of the charges of personal transaction accounts at SA’s banks.

The SRI 2022 Bank Charges Report says online banking services and new services, such as cash withdrawals and deposits at shop counters, have resulted in lower banking costs in general.

According to SRI, the report is not intended to comment on SA’s banks or express criticism on the bank charges, but rather give users an overview of the options regarding transaction accounts that the biggest banks in the country are offering.

This is the 12th bank charges report by SRI and this year’s edition takes a look at the new online banks, namely TymeBank, Discovery Bank, Spot Money and Bank Zero.

SA has seen an increase in digital banks in the last three years. The key differentiator of these new banks is that they operate as full-service digital-only banks without physical bank branches, ensuring competitive rivalry in the local banking sector.

In its report, the SRI notes competition in the banking sector is increasing, as the new entrants are pushing the boundaries when it comes to bank charges.

“It seems a revolution is taking place in the banking sector in that TymeBank and Bank Zero offer the same services as traditional banks, but at a fraction of the price. It will even be possible to do business at these banks completely free of charge if cash transactions and the sending of money to cellphone numbers are avoided,” explains Theuns du Buisson, economic researcher at Solidarity.

“The new online banks, which compete purely on the basis of costs, are by far the overall winners when it comes to costs alone. A list of 25 transactions that would cost between R99 and R143 at the traditional banks costs a mere R21.50 at TymeBank, or R25 at Bank Zero. Even when compared to the cheapest accounts of the traditional banks, those with branches, the traditional banks are lagging far behind.”

The report says TymeBank and Bank Zero are following a purely “what you see is what you get” approach.

“Neither of them charges any monthly fees and all transactions that would be charged at traditional banks, such as an e-mail message as proof of payment to the beneficiary, are free of charge at these banks.

“Other services, such as purchasing airtime, are also free at these banks. For free withdrawals at TymeBank, one first has to get a code on the app, otherwise the fee is R3 regardless of the amount.”

Turning to the needs of an average middle-class consumer, Du Buisson says: “When looking at the accounts for middle-class banking needs offered by the traditional banks, FNB is the overall winner with its FNB Aspire Current account.

“Like the other accounts in this category, it is a bundled account with a fixed amount, which includes a series of free transactions. FNB is by far the winner in this category because all the transactions on our list are included in the fixed amount of R99. Standard Bank’s MYMO Plus account takes second place, with an amount of R129.40.

“When discussing accounts for sophisticated banking needs, FNB also takes the honours with its FNB Fusion Premier account, with a total cost of R236 for our list of 30 transactions. Absa Premier Banking takes second place with a total amount of R242.50. Both of these banks offer good value because the number of free transactions they offer is more than that of Nedbank and Standard Bank.”

Additionally, the SRI takes a glance at low-cost accounts, with the report pointing out Absa and Capitec are the cheapest, with Absa charging a total amount of R37.10 for the basket of 12 transactions.

“Capitec, which charges 80c more at R37.90, is in second place. However, Capitec is the winner in the 17-transaction category with a total amount of R42.90 for that basket of transactions. FNB’s Easy PAYU account is in second place with a total of R54.45. Capitec is also the only one of the big five banks to offer interest on transaction accounts.”

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