Extra bank fees on Netflix and other subscription services in South Africa

South Africans may be paying extra fees for using international subscription services based on negligible or non-existent cross-border processing costs.

That is according to Bank Zero CEO Yatin Narsai, who recently spoke to MyBroadband about many South African banks charging extra fees for rand-based payments to international platforms.

It is common practice for banks to charge foreign currency conversion fees to cover costs associated with forex fluctuations if payments are made in currencies used outside their home markets.

However, in recent years, more South African banks have started charging “international payment” fees on online subscription services with rand pricing.

This extra fee applies to overseas subscription services like Netflix, Disney+, Amazon Prime Video, Apple TV+, AirBnB, Spotify, and YouTube.

It is typically calculated as a proportion of the transaction value, with percentages ranging from 2% to 2.75%. Certain banks — like Capitec and TymeBank — charge a fixed fee of R3.00 per payment.

Interestingly, most banks charge an identical foreign currency conversion fee to the cross-border payment fee.

Even though these transactions are also settled into overseas accounts, they do not have an additional cross-border payment fee.

A recent MyBroadband analysis found that all major banks, apart from Bank Zero, charged extra fees for rand-based payments to international services.

Asked about this, Narsai told MyBroadband that processing costs for rand-based card payments going into foreign bank accounts were effectively the same as those for local accounts.

“Bank Zero still follows the principle of not charging fees wherever possible,” Narsai said.

“Only if a third party charges us a big fee — like for cash or immediate payments — are we forced to also charge a fee to the customer.”

“No such large extra fees exist specifically on cross-border rand-based card transactions.”

Narsai explained that banks typically made good revenue from currency conversions. This revenue has shrunk as more global subscription services have adopted rand-based prices.

While MyBroadband previously asked several major banks why they charged this fee, their responses were vague regarding the precise costs involved with processing the payments.

A source in the industry also told MyBroadband that streaming services like Netflix, Amazon, and YouTube settled payments in dollars or euros even though prices were offered in local currency.

They suggested that banks might be exposed to forex exchange fluctuations, and some compensated for this with an additional fee passed on to consumers.

However, based on Narsai’s feedback, these costs may not be as significant as some banks have implied.

Yarsai also warned South African online shoppers that overseas merchants were keen to profit from foreign currency conversion fees.

Online stores may often show products in rand when a person visits their website from South Africa.

However, they regularly use a much higher currency conversion rate against their particular currency than South African banks.

As a result, the merchant may make extra money from a sale processed in rand. “The merchant can grab a piece of the fat margin used in the conversion rate to that home currency,” Narsai explained.

“Sometimes the customer has no choice, but sometimes they do,” Narsai said.

One good example of where customers can choose to rather be charged in a particular store’s “home” currency is Amazon.com.

While the website will default to rand, users can also transact in US dollars or other currencies based on where the marketplace is operating from.

If a customer fails to change this, they may pay extra due to the store’s higher conversion rate and will also incur a cross-border transaction fee with most banks.