Banks are coining it

daveza

daveza

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http://www.iol.co.za/index.php?set_id=1&click_id=13&art_id=vn20080625154705320C975741

South Africans are paying unnecessarily high bank charges as the country's four major banks have used complex fee structures to abuse their market power.

Bank charges paid by South Africans are too high, definitely more than they should be in a competitive environment the Competition Commission announced on Wednesday.

The Commission has released the executive overview and recommendations made by the Banking Inquiry Panel tasked to examine bank charges and access to retail banking in South Africa.

Over the past 22 months the inquiry held 21 days of public hearings in three cities, conducted 101 stakeholder meetings and canvassed the views of a range of interested parties including banks, consumer groups, small and prospective banks, non-banks and regulators.


The information gathered revealed a complex picture: a sophisticated banking system involving four major banks controlling more than 90 percent of the retail market for personal bank accounts. These include First National, Absa, Standard and Nedbank.



It was found that in 2006 transaction fees represented one third of the banks' income, altogether R34,5-billion excluding interest or corporate and business banking.

The inquiry's panel concluded that bank charges in South Africa were higher than they would be at competitive levels, with banks using "information asymmetries and product complexities" to abuse their market power.

"The banking sector is ripe for innovation on the back of new business processes and technologies," Competition Commissioner Shan Ramburuth said on Wednesday.

"Already we are seeing responses consistent with the direction of this report, which can fuel this dynamism.

"We look forward to the continued co-operation of the banks to find solutions to these complex matters," he said.

The panel made 28 recommendations covering the areas of penalty fees; automatic teller machine (ATM) fees; access to the national payment system; payment cards and interchange fees; and products and pricing.
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34.5 Billion in bank charges over 1 year ! And then they tell us it's expensive to install ATMs.

This is exclusive of interest they recover. I'm hopeless at high finance, but as I see it we pay the banks 34.5 billion a year so they can lend our money to others.
 
I recently spoke to someone else who has worked on banking systems - a bank like Nedbank has thousands of hidden fees that are levied. These are over and above their published banking fees. And Nedbank is not unusual, all the banks have thousands of hidden fees and charges. The banks cannot even give you a complete list on request because these fees are created adhoc.

Equally egregious are the software systems insurers have developed to analyse claims to determine who they can cheat out of their insurance cover.
 
http://www.moneyweb.co.za/mw/view/mw/en/page38?oid=212440&sn=Detail

The Commission’s proposals are a mixed bag, and fall into five broad categories (see Competition Commission: Bank fees too high). The first, and most contentious, is the issue of penalty fees, more specifically, the fees levied when a debit order bounces due to insufficient funds.

According to the Commission, “The Enquiry found that these fees, as high as R110 per rejected transaction, were too high and contributed to the vicious cycle of consumer indebtedness; they are also levied disproportionately onto lower-income customers.”

This makes sense. Low-income customers are those most likely to default on debit orders because low wages sometimes don’t stretch to the end of the month. Obviously, this is an inconvenience for the bank, which must electronically record the transaction, and for the client, who has to pay penalty fees and deal with an irate punter who didn’t receive the money owing.

But it’s a little difficult to figure out why this process would cost up to R110. After all, Capitec Bank (JSE: CPI), which services mostly low-income clients, charges R3,50 for a returned debit order, and according to CEO Rian Stassen, as many as 40% of debit orders are returned.

At Nedbank, an Mzansi client will pay as little as R10, while a cheque account holder will pay up to R75, according to Nedbank CEO of Retail Banking Rob Shuter (Nedbank is by far the cheapest overall on this count).

According to Standard Bank’s website, an EPlan customer will pay R31,50 for a “dishonor or unpaid item”, while people on more prestigious accounts like the Elite or Prestige cheque accounts will pay R105.
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So Capitec charges R 3.50 - other banks charge up to R 110.00 for the same work.

Nedbank - R 10.00 for the ' cheap ' accounts, but R 75 gets charged to the ' wealthy ' - for the same work ?

Why do we put up with this ?

When the consumer is ripped of at every turn by banks who ' are there for you ' , why are we so surprised when corruption and dishonesty are the order of the day.
 
http://free.financialmail.co.za/08/0620/cover/coverstory.htm

Also, as the banks pointed out in the inquiry, profitability isn't necessarily evidence that they are overcharging. But it didn't help the banks' case when, under cross examination, they were unable to link their costs to their fees.


While giving testimony, Nedbank retail boss Rob Shuter admitted that banks didn't base individual fees on what their costs were, but rather on what they believed customers were willing to pay for the "value they get".
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Go figure.
 
Here in nz all my transactions are free. I only pay charges for over the counter transactions and for drawing money from another banks atm. I pay $0 for my account every month. And my credit card is 45days interest free. I often wonder how the banks here make money.
 
WTF, Captain Obvious has woken up!?? We've been insanely gouged for at least ten years now and suddenly they're, like, "hmm hey these charges might be too high"? Did somebody forget to pay their annual bribes?

killadoob said:
you cannot do anything about co-ordinated monopolization
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To be fair, this isn't even a free market, it's our government's proudly announced and defended so-called "four-pillar banking" approach (has a nice ring to it doesn't it? I mean, who would be against such an uplifting-sounding euphemism as "four pillars", how could it be bad with a name like that?). Also goes by the names of "crony capitalism" or "corruption" in non-banana-republics. And further entrenched by a carefully constructed regulatory environment designed to look like it helps the poor while actually further protecting the market from competition. In South Africa's next life I hope it tries a free market approach.

Somehow I have a feeling this investigation will soon be "mysteriously" swept under the carpet or they'll get a very light slap on the wrist ... this investigation may just be a bargaining chip.
 
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My favourite example:
I have one credit card that I never use - but it is always near the limit (lots of old budget transactions from house renovation). Every month I pay the minimum amount due as per the statement I receive.
Anyways, one month the normal budget transactions get moved to straight, as per usual, and I get charged an annual card fee. This then pushes the amount owing on straight over my limit.
And the bank whacks me R165 "over limit fee".

Now, since I never used the card actively, and I paid the minimum amount due - why on earth should I be punished? It is the bank's duty to ensure the minimum amount paying is sufficient.
How many millions do they make from that "process"?
 
South African banks are some of the most profitable in the banking world. Average return on capital of 20%, is like a licence to print money. R34.5-billion a year in transaction fees is astounding on this country's small banking base. The best example of bringing competition between the banks, that I've seen, is what happened in the UK. The regulator there, made it very easy for the consumer to switch bank accounts without all the hassle. A simple phone call to the bank to whom you wish to switch to and the bank will do all the rest for you. Same with credit cards. The result was banks falling over themselves to get your business. Credit card interest rates quickly dropped and the old custom of staying with the same bank for life, also disappeared.
 
MacNabs said:
Here in nz all my transactions are free. I only pay charges for over the counter transactions and for drawing money from another banks atm. I pay $0 for my account every month. And my credit card is 45days interest free. I often wonder how the banks here make money.
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Shaddup about NZ now :p
 
Ozymandias said:
South African banks are some of the most profitable in the banking world. Average return on capital of 20%, is like a licence to print money. R34.5-billion a year in transaction fees is astounding on this country's small banking base. The best example of bringing competition between the banks, that I've seen, is what happened in the UK. The regulator there, made it very easy for the consumer to switch bank accounts without all the hassle. A simple phone call to the bank to whom you wish to switch to and the bank will do all the rest for you. Same with credit cards. The result was banks falling over themselves to get your business. Credit card interest rates quickly dropped and the old custom of staying with the same bank for life, also disappeared.
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If you want to change banks here the bank you choose will also do all the work for you but theres no point because they all the same pieces of ****!, in the UK there was no such thing as a deposit fee, here we have deposit fee's, withdrawel fee's , monthly acc charges, interest charges, they are ripping us left right and centre, not to mention they using our money to invest and make profit.
 
Yeah banks in the UK dont charge a cent even if you withdraw from an ATM that is not owned by your bank.... It only costs money to draw from a saswitch type of machine....... :( :( .... Everybody loves raping the poor South Africans!! Thought it might get better when Barclays came over, but no luck :mad:
 
ATM fees really hit the poor dude. I draw R1000 at a time (that's my limit), pay the fee. Someone less liquid would draw R50 now, R50 later... work out what the difference in fees are, drawing R1000 or drawing R50 twenty times.
 
Koos Custodiet said:
ATM fees really hit the poor dude. I draw R1000 at a time (that's my limit), pay the fee. Someone less liquid would draw R50 now, R50 later... work out what the difference in fees are, drawing R1000 or drawing R50 twenty times.
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Thats why I use a credit card for everything. Swipe, swipe, swipe, with no transaction fees, then end of month just dump all the cash in there in one R5.35 internet transfer transaction. Bank can suck it...
 
supersunbird said:
Thats why I use a credit card for everything. Swipe, swipe, swipe, with no transaction fees, then end of month just dump all the cash in there in one R5.35 internet transfer transaction. Bank can suck it...
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Bank doesn't "suck it", they still coin it, because they charge merchants a fortune in CC fees. The only thing the merchants can do is push their prices up and pass those costs onto ... us.
 
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