FNB slashes prices to ensure competitiveness at lower end of market

FNB has cut and simplified pricing across its transactional banking product range as part of its annual pricing review, effective July 1. These moves ensure it is more competitive at the lower end of the market, following Capitec’s price cuts in April, as well as changes and new products announced by rivals including Nedbank and Standard Bank in recent months.

Not only did Capitec’s price changes stimulate reactions from the other players, the success – thus far – of new entrant TymeBank has the bigger banks paying attention. Add to this Old Mutual’s transactional account strategy and the long-expected entry into transactional banking by African Bank, and the entry-level market suddenly looks very competitive indeed.

FNB is also offering additional value across all its accounts, something that it hopes will make customers less likely to switch to rivals. Across the majority of its transactional products, this is in the form of a monthly allocation of voice minutes, data and SMSs on its FNB SIMs, and at the top-end of the market, it is providing value-adds like free share trading and global accounts on certain products.

The pricing changes are clustered in two product areas:

Entry-level

Here, FNB is cutting the price of its Easy pay-as-you-use bank account to R4.95 a month. Christoph Nieuwoudt, CEO of FNB Consumer (which encompasses eWallet eXtra, Easy and Gold accounts), says the market is “super price-competitive at the entry-level”.

By cutting the monthly account fee, FNB says its account is well-positioned and, given that account holders have access to its “full ecosystem”, it offers “very good value”. Because cash still plays a big role in these customers’ lives, the bank has changed how it charges for cash withdrawals at FNB ATMs. Previously, customers would pay R1.90 per R100. From July, this changes to a flat rate of R6 per R1 000, up to a maximum of R2 000 a month.

It argues that this is a reduction, but in reality it is only a drop for withdrawals over R300 each. The new pricing model encourages fewer, but larger, withdrawals at ATMs. To complement this, it has reduced the fee for Cash@Till withdrawals to R1 (from R1.60). And the fee to send money via eWallet has changed to a flat rate of R11 (from a previous split-fee structure of R10.95 for under R1 000 and R13.95 for over R1 000).

On its bundled offering Easy Smart, the monthly fee drops by 9%. The bank has also launched a toll-free 24/7 call centre that offers legal, medical and financial advice to Easy Smart customers. Here, it has effectively copied the internal employee benefit for FirstRand staff and made it broadly available.

Fusion + Premium

Pricing on its Fusion products – hybrid cheque and credit card accounts with a built-in overdraft – has been held steady for Premier, Private Clients and Private Wealth clients, while the monthly fee on the new Gold Fusion account for “upwardly-mobile, creditworthy customers” drops significantly to get it in line with the traditional Gold Unlimited account. The latter doesn’t have a credit card bundled in, and the bank’s strategy here to extend credit to more customers in this segment is clear. Yashen Singh, CEO of Premium Core Banking at FNB, says the bank is starting to see take up of Fusion accounts “hit the hockey stick” [inflection point] following their launch two years ago.

Monthly bundled account prices – for a cheque and credit card – across the Premium segment (Premier, Private Clients and Private Wealth) increase roughly with inflation.

It is bundling in two free send money transactions per month (via the app) for clients in the Premium segment, something it says is a reaction to behaviour it sees across the base. Typically, these payments are for domestic workers or gardeners and, with the inclusion of these free transactions, it is hoping to shift customers away from cash. As important, of course, is the fact that money sent via eWallet will stay in the FNB ecosystem.

What is strange is that FNB has at the same time increased the monthly ‘bundled’ cash withdrawals and deposits at its ATMs before it starts charging fees. It has dropped the charges for airtime purchases via the app (or FNB website), as well as for electronic bank statements for the past 12 months (previously only the last three months were free) for Premium clients.

Beyond the actual pricing changes, the bank is also doubling down on its FNB Connect strategy. Easy Smart customers will get R60 worth of call, SMS and data value back on its FNB Connect mobile network every month (30 minutes,  30 SMSs and 80MB ). Nieuwoudt argues that if the customer switches to FNB Connect, their banking is effectively free. And, just for swiping at Shoprite once a month, Easy Smart customers can get an additional R50 FNB Connect airtime for free (those qualifying customers not on FNB Connect will still get R15 back for other networks).

Gold account holders get 60 minutes, 60 SMSs and 120MB on their FNB SIM every month, while Premier, Private Clients and Private Wealth customers get 60 minutes, 60 SMSs and 500MB a month from July.