Discovery Bank, Bank Zero, and TymeBank – South Africa’s newest banks – are set to “disrupt” the local banking scene in 2019.
Disrupt – an almost meaningless word which is akin to “millennial” in terms of its flagrant use by anyone who wants to show they understand trends and marketing – is not enough, however.
The new banks must destroy everything in their path, particularly the banking fees South Africans pay today.
We recently showed that compared to Bitcoin and Ethereum, and their respective blockchains, local banks are slow and cumbersome.
Where it took Bitcoin and Ethereum under 10 minutes to send tokens from one account to another, a local bank transfer from Standard Bank to Absa took almost 12 hours.
The cryptocurrency transfers did accrue a small transfer fee while the bank-to-bank transaction was free, but there are no monthly fees for most cryptocurrency wallets – unlike a bank account.
The potential of cryptocurrency transactions is not truly realised with local payments, however, and where they truly shine is in international payments.
While maintaining fast transfer times regardless of where in the world you send tokens, the fees you pay do not change. If you send Ethereum to Durban or Dubai, it will take the same amount of time and you will be charged the same fee.
The same cannot be said for bank transactions. “International fees” are charged when you make a payment across a border.
A practical example of this is when you pay your Netflix subscription fee, you pay extra – as the money goes to the company’s operation in Amsterdam.
A Netflix Premium subscription costs R169, with a transfer fee of R4.65 added on top of this.
These bank fees extend to “currency conversion” charges, too, which means that if you make a payment in an international currency with your card, you will have to pay for the pleasure.
Nedbank, Absa, FNB, and Standard Bank all charge this fee, which ranges from 2% to 2.75% – depending on which bank you are with. Capitec told MyBroadband that it does not charge a currency conversion fee.
While 2% does not sound like much, this accumulates rather quickly when making multiple transactions.
I discovered this on a recent work trip to the US, where I used my South African credit card to pay for items in US dollars.
After checking my online banking a couple days into my trip, I immediately switched to drawing cash for the day and sucking up the once-off withdrawal fee as opposed to making all payments with my card.
And yes, there is an “international fee” when withdrawing cash from an ATM in a foreign country.
Before switching to cash, these are the international fees which I accrued on my card:
The total: R378.02.
Whether these fees are implemented by the local bank, international banks, or a combination of the two is irrelevant – as the consumer this is what you pay.
Admittedly, the example of international transactions is an extreme one but it nonetheless serves as a reminder of the culture of fees worshipped by local banks.
These fees extend far beyond international payments and see users being charged to send an email payment confirmation to a recipient.
Before you fill in the text box at the bottom of your online payment confirmation window, entering the beneficiary’s email address so the bank will send them a mail confirming your payment was made, first check how much it will cost.
For me it was R1.10. My bank charged me R1.10 to send an automated email confirming a payment – another discovery made during the fee investigation.
Discovery Bank, Bank Zero, and TymeBank have all talked a big game about disrupting the local banking scene when they launch.
Let us hope they can deliver on their promises and that they will do more than merely disrupt – they must destroy and replace.