South Africa: SA Banks War Brings Competition but Could Erode Value

Johannesburg — SOUTH African banks must prioritise value over price in the wake of the so-called pricing war currently waging between the country's financial institutions.

This is according to an industry executive as the 'war' elicits debate in the sector.

Vanesha Palani, Nedbank Executive: Transactional Products, noted challenging economic conditions, the need to enable fully inclusive banking services and the entry of some new banking participants had created a 'race for the pricing bottom' among the country's banks.

These now offer low/no-cost bank accounts to existing and prospective customers.

The executive said while banks certainly needed to be fully committed to ensuring fully inclusive access to banking by offering affordable accounts to their clients, this should never compromise the delivery of real value.

"That means avoiding the temptation to offer bank accounts that are designed to appeal to customers solely on the basis that they are cheap or free," Palani said.

She said while lower banking costs benefitted customers, a truly value-driven banking offering required an ability by the bank that offered it to deliver a personal touch, built on a clear understanding of what the customer needs and insight into their typical banking behaviours.

"So, if a fee-free account ends up being little more than a generic offering, with no personalisation or focus on delivering lasting value, the affordability aspect could very quickly lose its sheen and be replaced by client frustration or worse, stagnation."

Palani said ultimately, inclusive banking should be attentive to the needs and requirements of all members of society, while adding sustainable value.

"... ..and just because low-cost bank accounts are affordable, that doesn't exclude them from this prerogative," she concluded.

PricewaterhouseCoopers (PwC) believes 2019 is likely to be heralded as "the year of the customer in South African banking" with the launch of three retail banking operations - TymeDigital, Discovery Bank and Bank Zero.

"Across both retail and wholesale banking, the customer is poised to benefit from greater choice and increased competition," PwC stated.

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