South African banks have stopped absorbing the cost of automatic teller machine (ATM) cash withdrawals and Saswitch network charges for their customers as of 1 June 2020.
The Saswitch network allows people from one bank to use an ATM of another bank to withdraw cash, and this charge is reflected in the difference in the fee which you pay to withdraw money from your own bank’s ATM and that of another bank.
Local banks had previously scrapped these charges in April to aid with social distancing during the initial stage of the coronavirus pandemic and national lockdown.
This meant that South Africans did not have to choose between travelling farther to an ATM belonging to their bank or paying an additional charge to withdraw from a nearer ATM belonging to another bank.
“Prudent business practice now requires that banks recover the cost of maintaining and operating ATMs and point-of-sale (POS) networks to ensure the sustainability of these operations,” The Banking Association of South Africa (Basa) said.
When Basa first announced the suspension of Saswitch fees, former FNB CEO Michael Jordaan argued that they should be scrapped permanently.
Jordaan was behind an industry proposal made to the Competition Commission by FNB in 2006 to scrap Saswitch fees.
This proposal was backed by Absa and Nedbank, which said scrapping these fees will make it more affordable for unbanked people to get accounts and use ATMs.
Standard Bank, however, was against the proposal. It said this decision would be prejudiced against the bank because it had a smaller ATM network than FNB and Absa.
Saswitch fees remain in effect 14 years later, with indigent customers that rely on cash purchases being the most affected by this additional charge.
MyBroadband asked South African banks about their perspective on Saswitch fees, and whether they would support an initiative to scrap the additional charges.
FNB Retail CEO Raj Makanjee told MyBroadband that investment in ATM infrastructure and maintenance is increasingly expensive.
“ATMs are not provided by all banks, and the cost of servicing other banks’ customers are covered through a regulated fee passing from the customer’s bank to the ATM providing bank,” Makanjee said.
“The customer’s bank then has to recover these fees, which is done at the discretion of each bank.”
He said that FNB considers its ATMs to be a strategic interaction point with its customers.
“While FNB supports the interoperability of ATMs for the benefit of the economy and the public in general, the investment in this infrastructure is targeted at and intended for its own customers.”
Makanjee added that when FNB customers are forced to use ATMs belonging to other banks, they will be charged a fee to cover FNB’s fee to that other bank.
“FNB supported the waiving of these fees during level 5 and level 4 lockdown to enable adherence to lockdown regulations and social distancing,” Makanjee said.
“During level 5 and level 4 lockdown, FNB encouraged customers to use their closest ATM or any ATM with the least queues, and to reduce the congestion at retailers especially over social grant pay-out days and paydays.”
Absa RBB Everyday Banking managing executive Cowyk Fox told MyBroadband that the discussion around Saswitch fees requires the consideration of many factors.
“COVID-19 has caused unparalleled socio-economic difficulty to society,” Fox said, “Amongst the industry solutions implemented, was the temporary subsidisation of Saswitch ATM fees until the commencement of lockdown Level 3.”
“While the industry and BASA would provide greater detail, the discussion around ATM fees requires a deeper analysis. There are many factors that need to be taken into account, including the sustainability and integrity of the country’s ATM infrastructure, which given the widespread access it provides to banking, could be considered a national asset.”
Fox explained that, in essence, the customer is paying for the convenience of having access to the collective banking ATM network across the country.
“When our customers use non-Absa ATMs, there are additional costs to the bank in the switching of transactions between the respective bank and Absa as a consequence of the customer using another bank’s ATM.”
“While the Absa ATM network is sizeable (over 8,000 ATMs nationally), the alternative is unsustainable – deploying many more Absa ATMs, resulting in much higher normal ATM transaction fees to recover the costs of additional infrastructure,” Fox said.
Absa, therefore, encourages its customers to use its ATMs and is confident that its large number of ATMs adequately services its customer base across the country.
“As an industry, we need to caution against inadvertently creating a disincentive for ATM investment and maintenance – what will happen to SA’s ATM infrastructure, it’s national payments system and access to banking and cash for those in rural areas, for example, if this happens?” Fox said.
“The pricing needs to balance the cost to the consumer whilst simultaneously incentivizing banks to keep investing and modernizing this critical network.”
Nedbank told MyBroadband that the banking landscape has evolved since the initial campaign by Michael Jordaan to scrap Saswitch fees in 2006.
“Nedbank is supportive of using banking infrastructure more efficiently so that it benefits all South Africans including ATM infrastructure.”
“This needs to be done in a sustainable manner that continues to drive innovation and support for these channels. If not done responsibly, there could be an increased risk and cost to end-users,” the bank added.
Nedbank added that the accelerated adoption of mobile and digital banking has reduced the reliance on cash, and this is set to continue going forward.
Additionally, Nedbank customers have the option to withdraw cash at Retailers at a fraction of the cost than through ATMs.
“Customers have a choice. They can avoid the fee by using their own Bank’s ATM and by swiping a card to transact instead of cash, where ever possible,” Nedbank said.
“The benefit of having access to another Bank’s ATM would be the convenience of being able to withdraw cash there and then.”
Capitec marketing and communications executive Francois Viviers told MyBroadband that the cost of ATM infrastructure and the management and securing of cash is substantial and is growing every year.
“The Saswitch fee is the fee that one bank must pay to another when their clients use the other bank’s ATMs, and is necessary,” Viviers said.
“At Capitec our approach has always been to keep our fees flat and as low as possible.”
“Our clients therefore only pay R1 more when they use another bank’s ATM instead of a Capitec ATM, making it easy and affordable for our clients to use any bank’s ATM,” he said.
Capitec also motivates its clients to migrate from cash to digital or card payments, which is much more affordable.