Major banks have broken ranks for the first time on the issue of bank charges, with First National Bank (FNB) implying that other banks are using penalty pricing to force customers out of branches.
FNB publicly assured its clients this week that it would not use price penalties to force them to bank electronically rather than over the counter.
FNB's statement came hot on the heels of ABSA's annual review of transaction charges which will see ABSA customers paying heavily for using over-the-counter services rather than automatic teller machines (ATMs) or telephone and internet banking channels.
ABSA, which recently launched a new service offering free internet access, has increased banking fees by up to 180 percent for over-the-counter transactions.
Until now all the major banks have consistently used their fee structures to force customers to use ATM, telephone and internet banking services rather than tellers in branches. Banks have been reducing their branch networks in spite of complaints from customers, particularly the elderly, who, for security or other reasons, prefer not to use ATMs. But now FNB is taking a new line.
Wendy Lucas-Bull, FNB's chief executive, says: "At FNB we don't believe in penalty pricing in order to force customers to change their patterns of behaviour.
"Pricing should be determined on the basis of the cost to the bank of delivering that service."
Extensive research by accountants Deloitte & Touche and by FNB in local and international markets shows conclusively that quality of service and personal attention are more important to customers than convenience, she says. Even in sophisticated markets, consumers have not abandoned the branch in favour of other channels such as the internet.
In South Africa, more than 90 percent of internet and telephone banking clients use ATMs or branches for some of their banking transactions in any given month.
Many bank customers have no option but to use branch-based services and should not be penalised by high fees, Lucas-Bull says. About 45 percent of the population live in rural areas and 95 percent have no regular access to the internet.
Lucas-Bull also says it is a fallacy that it always costs the bank more when you use the branch facilities rather than an ATM. Deposits are cheaper for the bank to process through the branch than through an ATM, according to her.
FNB reviewed charges in November last year and the next major review is due next November.
Brendan O'Donnell, managing executive of ABSA Group, says ABSA's fees reflect the cost to the bank of providing services as well as a margin for the bank.
ABSA's prices are in line with other banks, he says.
The bank cannot afford to operate below cost, so over the past three years the bank has been adjusting transaction charges to bring them into line with actual costs, O'Donnell says. The bigger fee increases - of 180 percent and 150 percent on certain over-the-counter transactions - reflect this.
He says ABSA held back on increases in the past because account holders did not have the choice of channels that they have today. The bank has substantially more ATMs, banking kiosks and warehouse outlets (ATMs with assistance from staff) than before.
He admits that Absa faces a challenge in rural areas where the bank does not provide ATMs because the low demand does not justify the expense of installing an ATM.
Concerning fears from older people who prefer to do their business inside banks because of crime, O'Donnell says the bank offers free banking for over-55s if they have a minimum investment of R15 000 with ABSA.
Other account holders have the option of keeping a minimum balance in their account which also qualifies them for free banking.
Dave Oosthuizen, divisional director at NBS Direct, says the branch still plays a role, particularly for unsophisticated customers. NBS does not apply penalties to its cost structures and the charges reflect the costs to the bank, Oosthuizen says. "It would be unfair to penalise clients who use bank channels."
Unlike Lucas-Bull, Oosthuizen says it is cheaper for the bank if you use the electronic channels and the bank passes these savings on to those who use these options.
Global research on customer needs by Deloitte & Touche in 10 major countries found that the convenience of bank branches was still prized by bank clients.
"Banks will need to move cautiously in reducing the size of branch networks if they are to retain existing customers," the research report states.
And the main thing customers want is good service.
"Consumers around the world want their financial service providers to treat them as valued customers by providing personal, caring service. In addition, they want their financial service providers to offer responsive service, quickly resolving problems and providing requested information.
"Executives may have lost sight of the fundamental importance of customer service," the report says.
SAMPLE BANK CHARGES
What your bank charges you for cash withdrawals of R500 from a savings account:
Over the counter
ATM
ABSAR15*R5.28*FNBR11R5NedbankR8.60R4.76NBSR5.20R1.85PermanentR8.60R4.76StandardR25R7.10* From April 1 2001
Note: These ATM fees are charged if you use your bank's own ATM network. If you use another bank's ATM, the fee increases considerably.
Generally on savings accounts, some or all your transactions are free if you maintain a certain balance in your account. At ABSA, it is R4 500 (from April 1); at FNB it is R1 500; at Nedbank it is R5 000; at Perm it is R6 000; at NBS it is R2 500; and at Standard it is R5 500. The fees above assume you do not keep the minimum balance in your account.
Source: Bankmonitor ( www.bankmonitor.co.za)