"Big Four" now in fierce competition with Capitec in basic bank account market

According to the seventh Bank Charges Report released by the Solidarity Research Institute (SRI), Nedbank has joined the fray, thus bringing all major banks in line in terms of fees. This is largely due to pressure exerting by Capitec in the middle-income market.

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Paul Joubert, senior researcher at the SRI, says: “Unlike in the past, Nedbank, with its new Pay-As-You-Use account, now also competes well with the cheaper accounts offered by Capitec, Absa, FNB and Standard Bank. Therefore, all Capitec’s big competitors are now imitating its low-cost account model.”

PAYT being phased out

He adds that at the middle-income level, the lower cost of bundle accounts has had the effect of pushing pay-as-you-transact (PAYT) accounts out of the market. “In the past three years, the phasing out of PAYT accounts have been a remarkable phenomenon. Nedbank and FNB have already stopped marketing PAYT accounts to their clients entirely.”

With regard to the bundle accounts, little has changed, with all of them costing about R100 per month. “Although there is a minimal difference in cost between the bundle accounts, strong competition at this level still exists between the banks. After Capitec’s offering, Standard Bank’s Elite Plus account remains the cheapest in this category, as was the case last year.”

Rewards programmes playing a role

Joubert believes the strong competition among accounts marketed to the middle-income bracket means that other factors such as reward programmes are increasingly influencing clients’ choice of a bank.

“However, it seems as if most banks are curtailing their rewards programmes, for instance by making it more difficult to reach a high level of earnings in the programmes. Therefore, clients motivated by this incentive should be aware that the terms and conditions of these could change often – as in the case of FNB’s eBucks recently.”