Fee difference on typical basket of transactions could be over 85%.
An analysis of basic business bank accounts offered by the country’s major banks as well as newer entrants has revealed that small businesses are paying shockingly stark differences in bank charges.
To compare costs, a basket of ‘typical’ transactions of a small business with under R5 million in turnover was used. This basket was developed in conjunction with professionals who have considerable experience in the industry. On this simple set of transactions, small and medium-sized enterprises (SMEs) could be paying as little as R100 in bank fees, or well over R500 a month.
The main transactions assumed in the comparison are:
- 35 electronic payments, including salaries (and emailed proof of payments)
- Four debit orders
- 16 local card purchases
- Eight international card purchases (online)
- Sending cash to eight recipients
- Buying four prepaid items, and
- Two cash withdrawals
The turnover assumption is useful as some banks have turnover limits for certain accounts.
Absa, for instance, has a ‘Lite’ version of its Business Evolve account for businesses with turnover of under R1.5 million.
Importantly, the analysis excludes ‘personal’ accounts that tend to often be used by sole proprietors (a plumber’s Capitec account, for example).
It must be noted that some of these entry-level accounts are only available to sole proprietors. Companies – (Pty) Ltds and close corporations – have to use far more expensive account options.
TymeBank’s business account, limited to sole proprietors, has the same Fica requirements as for individuals (and is linked to one’s personal account profile). By contrast, Bank Zero’s offering is available to companies.
Pricing is also distorted by ‘send money’ transactions.
Sending R2 000 instantly to a casual labourer would cost R48 through Absa and FNB – but the launch of PayShap, which offers an easy way to send up to R3 000 using only a cellphone number, will drive this pricing down.
For now, the comparison includes the banks’ own traditional eWallet/Instant Money/Cash Send options.
The cost of withdrawing cash at an ATM is also very high at most of the ‘big four’ banks, with prices at three of them more than double the rates charged by challenger banks.
Bundles of savings
Nedbank’s Business Pay-As-You-Use account is its base option (with its Startup Bundle, limited to businesses with under R3 million annual turnover, offering zero fees on certain transactions for the first six months).
It offers two transaction bundles (with 50 and 100 selected transactions included).
Its small business pricing strategy is clearly focused on driving uptake of these. The Bundle 50 option is included below to illustrate that a saving of 33% is possible when using this instead of pay-as-you-transact.
A pool of 50 transactions across EFT payments, card purchases and withdrawals was ‘zero-rated’ for purposes of comparison.
Debit orders were excluded although these can count as bundled transactions due to the fact that these are typically processed at month-end.
This further shows that disregarding a bundled pricing option with a higher monthly fee may not make sense when a small business has a fair amount of transaction activity each month.
‘Big four’ banks
|Absa Business Evolve Core||FNB First Business Zero||Nedbank Startup Bundle/Business PAYU||Nedbank Business Bundle 50||Standard Bank MyMoBiz|
|EFT payments (incl salaries)||35||R50.75||R52.50||R292.25||R41.75*||R183.75*|
|POP (email for EFT payments)||35||R21||R0||R17.50||R0||R38.50|
|Transfers to accounts in same legal entity||5||R0||R7.50||R0||R0||R0|
|Card purchases (local)||16||R0||R0||R68.80||R8.60||R0|
|Card purchases (foreign)||8||R0**||R0**||R34.40**||R12.90**||R0**|
|Send money (R2 000 to customer at same bank)||4||R192||R192||R40||R40||R54|
|Send money (R2 000 to customer at another bank)||4||R192||R192||R40||R40||R54|
|Buy prepaid items (data/airtime/electricity)||4||R6.40||R10.80||R6||R6||R2|
|Cash withdrawal at ATM (R5000)||1||R45||R115||R125||R0||R110|
|Cash withdrawal at POS||1||R4.85||R0||R4.30||R4.30||R2.20|
|Scheduled payment alerts||R0||R3.80||N/A||N/A||R0|
|Daily balance alerts||R0||R16.50||N/A||N/A||R0|
* Inexplicably, electronic payments are free via Nedbank’s USSD (cellphone banking) channel.
** Excludes currency conversion fee.
Digital banks raise competition
It is obvious that the launch of TymeBank and Bank Zero in recent years caused most traditional ‘big four’ banks to relook at their entry-level propositions. FNB and Absa both launched no-fee accounts, while Standard Bank has a business version of its low-fee MyMo account.
Capitec is the outlier among so-called ‘challenger’ banks as it inherited an existing proposition and fee structure when it acquired Mercantile Bank in 2019. It has since simplified the offering and pricing, but this remains high when compared, for example, to a sole proprietor who is currently using their ‘personal’ Capitec account to run their business.
With its current pricing, the Capitec Business account is roughly in line, on this basket of transactions, with those offered by the big four – at approximately R500 per month. It is understood that Capitec is working on a lower-fee business account.
|Bank Zero||Capitec Business (formerly Mercantile)||TymeBankEveryDay Business|
|EFT payments (incl salaries)||35||R0||R175||R0|
|POP (email for EFT payments)||35||R0||R0||R0|
|Transfers to accounts in same legal entity||5||R0||R25||R0|
|Card purchases (local)||16||R0||R80||R0|
|Card purchases (foreign)||8||R0||R0*||R24|
|Send money (R2 000 to customer at same bank)||4||R0||R30**||R0|
|Send money (R2 000 to customer at another bank)||4||R34||R30**||R28|
|Buy prepaid items (data/airtime/electricity)||4||R0||N/A||R0|
|Cash withdrawal at ATM (R5 000)||1||R45||R47.50||R50|
|Cash withdrawal at POS||1||R2||N/A||R0***|
|Scheduled payment alerts||R0||N/A||N/A|
|Daily balance alerts||R0||N/A||N/A|
* Excludes currency conversion fee.
** No clear ability to send money in pricing guide; immediate payment pricing was used.
*** At Pick n Pay/Boxer stores only.
The business offerings of the two digital-only banks, Bank Zero and TymeBank, are incredibly compelling when compared to the fees rivals charge.
There are no monthly fees, nor for most electronic transactions. A small business with a transaction profile similar to the basket used in this analysis will be paying R100 or less per month in bank charges, a saving of more than 80% on the roughly R500 level at other banks.
A simple change in behaviour each month, that is, not withdrawing cash at an ATM, will see bank charges halve to the almost ridiculous R40 to R50 level (at rivals, this single change will drop fees by between 9% and 24%).
It is no surprise that both of these entrants are specifically targeting the SME segment.
More broadly, as with personal banking, it is useful for a business owner (or their accountant) to do a costing exercise to see whether or not they are using their bank’s most appropriate bank account, and whether they’re overpaying and should consider moving.
The banks don’t exactly make this simple – none offer calculators to compare offerings – and only two (Absa and Standard Bank) allow you to at least compare their different business accounts in a simple-to-understand table.
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