A new player has entered the South African banking market - and it claims that once you've experienced its service, you will never look back.
20twenty, South Africa's first virtual bank that operates entirely on the internet, was launched by Christo Davel, a Cape Town businessman, and Saambou Bank, which currently owns 65 percent of the venture.
Meanwhile, Old Mutual is quietly rolling out its own cyber offering. The first 1 000 Old Mutual clients were recently invited to make use of Old Mutual Banking Services.
Although most of the major banks offer internet banking, they are unable to offer this service to customers at a reduced cost because of the huge overheads associated with maintaining their bricks-and-mortar branch infrastructure.
Virtual banks, on the other hand, are able to pass the cost savings on to clients in the form of lower bank charges and interest rates.
A recent survey on banking in South Africa by Pricewaterhouse-Coopers predicted that the number of internet customers will grow dramatically over the next three years from 582 000 to 2.5 million.
Most banks believe that the internet can be used to reduce costs and generate revenues.
Some of the benefits offered by 20twenty include low transaction fees, low interest rates on credit balances, high interest rates on money you have in your account, a single account and a MasterCard.
20twenty's Davel says in future the bank will provide investments, insurance and other services by going into partnership with financial service providers.
Such is 20twenty's confidence in its ability to provide top-class service that it guarantees it will help you to transfer to another bank of your choice if you are not satisfied with 20twenty after three months.
The bank is open to anyone who is 16 years or older, who has a valid South African identity document and residential address, who has regular access to the internet and can be contacted via a personal e-mail address.
One account
Instead of separate cheque, savings and credit card accounts, 20twenty offers one account with a single MasterCard-branded card which operates as a debit card. Trans-actions are processed through your account almost immediately.
The single account is based on the principle that it does not make sense to have your savings in one account while you are paying exorbitant interest rates for your credit card or overdraft debt in another account. By borrowing and saving through the same account, you can use your regular income, and any savings, to reduce your debt, immediately cutting your interest bill.
In practical terms, it means you will first make use of money in your account. While you still have a positive balance, you earn interest on that money. When this runs out, you make use of credit on which you will be charged interest.
The bank does not offer a cheque book. If you need to draw a cheque, it will be couriered to you at a delivery charge of R20. Similarly, if you need to deposit a cheque, you can call the bank and arrange to have it collected and paid into your account for R20.
20twenty currently does not offer a garage card. Davel says a garage card will become available within two months.
The bank offers credit online and in real time. The amount of credit you can access depends on your personal circumstances. To qualify for credit, you need to be over the age of 21, earn R5 000 or more a month, have an existing bank account and a satisfactory credit history.
Essentially, 20twenty offers two fee options:
* A flat fee of R50 a month, which includes unlimited banking both online and off, as well as four free withdrawals from any bank's automatic teller machine (ATM) in a month. Thereafter you will be charged R5 for each withdrawal. All over-the-counter withdrawals will cost you R35; or
* A pay-as-you-bank fee, where you pay R5 for each transaction as and when you make it.
Both fee options include unlimited free cheque deposits and 12 free cash deposits a year at any Saambou branch. Thereafter a fee of one percent of the value of the transaction applies. There is no annual card fee and lost card protection is free of charge.
Regarding interest rates, 20twenty offers six percent a year on any amount from R1 to R9 999 in your account. From R10 000, you will earn nine percent. Interest is calculated on the daily closing balance and will be accrued monthly.
To make use of credit, you will be charged at the prime lending rate, which is currently 13.5 percent. You have to repay at least 12.5 percent of the amount of credit you use each month. But if you choose to pay your regular income into your account, you will in all likelihood cover your repayment or even wipe out your debt.
Currently, two to three percent interest on positive balances in your current account is considered a good deal. If you go into overdraft, you will probably be charged interest of around 22 percent.
Old Mutual offering
Meanwhile, Old Mutual staff, intermediaries and selected customers have been trying out Old Mutual Banking Services.
The bank's current offers include a fixed deposit, notice deposit and savings account.
The bank plans to offer asset- backed loans in the third quarter of this year and home loans in the last quarter. Asset-backed finance means that if you have assets - policies and unit trusts - with Old Mutual, the bank will offer you a loan using those assets as security.
Old Mutual announced the launch of the bank two years ago to retain as savings some of the proceeds paid out during the company's demutualisation.
Eugene Smith, the managing director of Old Mutual Banking Services, says the bank's focus is managing and creating wealth. It will not be competing on a transactional level with the traditional banks.
The bank will not offer paper-based transactions, such as cheque facilities, and is not looking to lure consumers who would make numerous low-value transactions on their credit cards. The cost structure of the facilities offered by the Old Mutual bank will discourage such transactions.
Smith could not say what interest rates Old Mutual would be offering on its home loans, except that they would be "very competitive". The lower the value of your loan to the value of your property, the lower your interest rate.
The percentage of your monthly repayments in relation to your total salary will also influence the rate you will pay.
During the course of next year, the bank will offer an ATM card to give its customers cash facilities. Card users will be able to draw cash and the card will function as a debit card.
Transactions will be limited to, for example, R1 000 a transaction in order to discourage low-value transactions.
Smith says bank charges will be kept low and will be free up until the end of June 2002.