Capitec holds most fees steady after last year’s cuts

After the unprecedented move of cutting its monthly account fee by 14% to R5 last year, Capitec is holding the fee steady from March 1, 2020.

This move comes as rivals Absa, FNB and Nedbank all cut the price of their entry-level accounts in 2019. In May, Standard Bank introduced a new account for this segment, MyMo, with a month fee of R4.95, while Nedbank dropped the monthly fee on its entry-level Pay-as-you-use account completely in April.

These fundamental shifts have occurred following the disruptive entry of TymeBank earlier last year. Its EveryDay account marked the first time a bank with significant backing had centred its core proposition on a full transactional bank account with zero monthly fees.

Along with this, it has ensured its per-transaction fees are easy to understand and competitively priced. By November, just eight months after launching, TymeBank had signed up a million customers.

Old Mutual has also entered the lower end of the market by piggybacking on Bidvest Bank, while African Bank made its transactional banking play – also with no monthly fee – in April. The market is undoubtedly considerably more competitive, with Bank Zero as well as Post Bank to both still enter the fray.

Capitec’s changes

While Capitec is not changing its monthly fees, or those for electronic payments, immediate payments (the cheapest in the market) and debit orders, there are substantial increases in the costs to withdraw cash across all channels.

Withdrawals at retailer till points (Pick n Pay, Boxer, Shoprite, Checkers) are now at the flat rate of R1.20, an increase of 20%, while withdrawals at the bank’s own ATMs are up R2, or 33%, per R1 000.

Withdrawals at other ATMs are up “only” 12.5% – to R9 per R1 000.

This means the differential between using Capitec’s own ATM network or other banks’ ATMs is now only R1 per R1 000 withdrawn (from R2 last year).

As the shift to digital channels gathers pace, the cost of cash will continue to rise across the industry. Capitec last year changed the structure of its pricing of ATM withdrawals. These were previously flat-rated, then changed to a rate per R1 000. This meant steep increases for withdrawals over the R1 000 mark. A R2 000 withdrawal under the old pricing structure would’ve cost R8.83, for instance, while under the new model, this currently costs R12. From March, this will increase to R16.

It is not yet clear whether the increase in withdrawal costs across a retailer footprint has been driven by input costs, or whether the bank is using this to (partially?) offset the unchanged monthly account admin fee.

It has not yet disclosed fees beyond the ones listed above, including those for cash deposits, or the monthly credit card admin fee. These will likely be published this week.

Keeping the monthly fee unchanged is notable, more so given the competitive backdrop.

Capitec would’ve surely modelled a number of scenarios, including dropping the monthly fee altogether, cutting it further, holding it the same, as well as increasing it. There is a school of thought among some analysts that market pressures may force the bank to eventually drop the monthly fee altogether. On a base of approximately 13 million accounts, this equates to nearly R800 million a year.

For now, though, Capitec seems unwilling to get dragged into a real price war which, simply put, would be a race to zero.

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