The so-called pricing war waging between the banks in South Africa has elicited much debate among all stakeholders in this vital financial services segment.
A combination of challenging economic conditions, the recognition of the need to enable fully inclusive banking services, and the entry of a swathe of new banking participants has created something of a “race for the pricing bottom” between the country’s banks, all of which now offer low-, or no-cost bank accounts to their existing and prospective customers.
While arguments in favour of this type of pricing competition quite rightly abound, and there’s no denying that competition is an essential requirement for a healthy and sustainable industry, the real benefits of an affordable bank account have little to do with cost savings and everything to do with its ability to add real and lasting value to the customers who use them.
So, while banks certainly need to be fully committed to ensuring fully inclusive access to banking by offering affordable bank accounts to their clients across, doing so should never compromise the delivery of real value.
That means avoiding the temptation to offer bank accounts that are designed to appeal to customers solely on the basis that they are cheap or free.
Ultimately any customer offering should be built on a clear understanding of why bank accounts exist in the first place.
Irrespective of where on the income or personal wealth spectrum people find themselves, the main reason they have a bank account is not merely so that their salary can be deposited into it every month.
The vast majority of banking customers want their bank account to help them effectively manage their money.
As such, any bank account, irrespective of what it costs (or doesn’t) every month, has to add quantifiable value to the accountholder’s life by enabling them to achieve their aspirations and move steadily closer to living the life they desire.
This value-adding requirement has the potential to put a low-cost, or zero-fee, bank account in something of a quandary if these accounts aren’t part of a carefully planned, well thought out strategy from the outset.
That’s because these accounts need to be able to deliver this value sustainably, and indefinitely, without putting so much pressure on the bank’s margins that it is forced to try and generate income down the line by passing on hidden costs to the customer.
And this sustainable value principle isn’t reserved for low-cost banking offerings. It needs to underpin all bank account propositions.
As such, the commitment to delivering lasting customer value should extend across all the account offerings, from every South African bank.
So, while not all of these will be fee-free, they should all be specifically designed to maximise customer value by meeting the specific requirements and expectations of customers across all market segments.
The rationale for prioritising value over price in this way is more than a little compelling.
While lower banking costs undoubtedly benefit customers, a truly value-driven banking offering requires an ability by the bank that offers it to deliver a personal touch, built on a clear understanding of what the customer needs and insight into his or her typical banking behaviours.
So, if a fee-free account ends up being little more than a generic offering, with no personalisation or focus on delivering lasting value, the affordability aspect could very quickly lose its sheen and be replaced by client frustration or worse, stagnation.
In the end, inclusive banking should be exactly that, inclusive of the needs and requirements of all members of society, while adding sustainable value.
And just because low-cost bank accounts are affordable, that doesn’t exclude them from this prerogative.
• Vanesha Palani is executive: transactional products at Nedbank