So you want to ditch your bank and switch to another, but you’re daunted by the prospect of switching and all that it entails?
The Banking Association of South Africa (Basa) has released an updated Code of Banking Practice, which covers switching a transaction account to another bank. It spells out your role and that of your old and new banks.
Basa is an industry body that represents all registered banks in South Africa. Its new code commits members to “making it as seamless and easy as possible for all personal transaction account customers to switch banks”.
The code relates only to transactional accounts, not deposits and loans, which are individual contracts. You may terminate deposits and loans according to the contractual terms, it says.
The code explains that since banks compete to attract new transaction account customers, you need to compare their products and services, fees and charges.
“A number of independent comparison calculators are available to assist you in this. We (your bank) will also assist you to calculate the costs for your specific transaction pattern via our website, call centre or branch services.”
Basa advises that you take the following into consideration before you start the process of switching:
* The rates and fees of your current bank versus another bank;
* Whether the location of branches and ATMs meets your needs; and
* The additional benefits on offer from both banks.
Depending on how you bank, the location of branches and ATMs may be of lesser or greater significance to you.
Once you’ve decided on a new bank, how do you go about switching? Basa says it can be done in three easy steps: open a new account, switch transactions, and close your old account.
1. Open a new account
The first step is to open an account with your new bank.
Give your new bank the appropriate information so that it can transfer debit orders, arrange new stop orders and, if relevant, load your payment beneficiaries.
Most of the banks will do all of this for you at no cost.
Sugendhree Reddy, the director of banking products at Standard Bank, says Standard Bank handles the switching of debit orders as a free service to new clients.
So does Absa, Arrie Rautenbach, the head of retail markets at Absa, says. The bank also notifies your employer of your new Absa account so that your salary is paid into it.
“Switching is a key service that we provide to new customers free of charge. Once a new customer applies for a transactional account, either online or in a branch, Absa’s dedicated switching team will facilitate the necessary changes for the customer,” Rautenbach says.
Andrew Bladon, the head of sales at the Core Banking Solutions division of First National Bank (FNB), says at FNB debit-order switching, salary switching and the loading of beneficiaries are done free of charge for new clients. To switch to FNB, all you do is give the bank your most recent bank statement, for it to identify your debit orders, and sign a one-page mandate, which gives FNB permission to act on your behalf when instructing your service providers about your new banking details, Bladon says.
Anton de Wet, the head of client engagement at Nedbank, says Nedbank ensures that the switching of debit orders and salaries is “seamless” and “hassle-free”.
Your new bank will also provide you with the following information:
* The terms and conditions that are applicable to your new account;
* Details of the fees, charges and interest rates that apply to your new account; and
* Contact information for further assistance in switching your account.
The Code of Banking Practice says: “When you give your new bank a signed debit order or salary redirect form, the bank may inform existing debit order originators of the new account details. You may have to confirm this with the originators.”
The code says that while the banks are committed to ensuring the process is smooth, it requires the co-operation of all parties involved – especially debit order originators and salary, income and benefit payers.
2. Switch transactions
Ask your old bank to provide you with the following information, which, in terms of the code, it must do within 10 business days of your notifying it that you are switching:
* Up to three months’ statements;
* A list of stop orders loaded on your account;
* A list of beneficiaries loaded on your account; and
* Any supplementary or linked cards or accounts that may be affected by the switch.
3. Close the old account
Instruct your old bank to close your account.
Basa says it’s advisable to keep the old account open for at least six weeks after you have switched, so that all transactions can be identified and switched. “Keep some funds in the old account to cover any transactions that are not switched in the six weeks.”
Rautenbach warns that while both accounts are open, you must budget for the cost of maintaining them. He suggests you load an overdraft facility in case payments continue to be deducted from your old account.
“If something goes wrong and an automatic payment bounces, you could be asked to pay a fee, either by your account provider or by whoever the payment was going to. The mistake may be someone else’s fault if, for example, the paperwork you provided was not processed (by the account provider) on time. If this is the case, complain. You may be able to get the fee waived,” he says.
Once you’ve switched, Basa advises that you keep an eye on your debit orders and other transactions to avoid unpaid debit orders and to ensure all transaction originators are using your new banking details.
And don’t forget those once-a-year debit or stop orders in your switching instructions to your new bank.
To download the updated Code of Banking Practice, go to www.banking.org.za. You’ll find it on the home page under “What’s new”.
COMPLEXITY HOLDS YOU CAPTIVE, SAYS BANKING OMBUDSMAN
Clive Pillay, the Ombudsman for Banking Services, says he is not surprised that his office hasn’t received complaints relating directly to switching accounts from one bank to another. Clients are hindered by “banking product and pricing complexity”, which makes it difficult for them to make comparisons, he says.
“Since 2004, the Falkena Report into competition in South African banking identified switching as a problem. The report found that consumers were deterred from switching accounts due to problems with information (insufficient) and costs,” Pillay says.
In 2008, the Enquiry Panel of the Competition Commission also found that the cost to customers of switching banks, including the cost of finding an alternative, created “a significant degree of customer captivity”, he says.
The panel recommended that the Banking Association of South Africa (Basa) develop a set of criteria for a switching code to be included in its Code of Banking Practice.
Late last year, Basa released a revised code of practice, including a switching code.
The switching code does make switching from one bank to another “relatively easy”, Pillay says. However, the problem, he says, is that the switching code in itself will not achieve the objective of facilitating the switching of accounts.
“The problem, in my opinion, lies in the fact that there is considerable product and pricing complexity in banking, coupled with information asymmetries (inequality of information).
“With regards to product and pricing complexity, banks appear to offer the same set of account-holding and transaction facilities, but these facilities are bundled, packaged and priced differently.
“The panel found that there is a need for simplified offerings that can be readily compared, both in price and content,” Pillay says.
The second problem, that of asymmetry of information, makes it difficult for consumers to understand, assess and compare the different offerings of the bank.
“It is only once a consumer understands the product and the pricing and has sufficient information at his or her disposal to be able to make a comparison, that he or she can then make an informed decision, and then switching becomes an option.”
Pillay says: “There is a need for banks to simplify their products, be more transparent with pricing and supplement this with sufficient information so as to enable a consumer to make a meaningful comparison between banks and ultimately an informed decision on switching.”
* You can contact the Ombudsman for Banking Services by telephoning 0860 800 900, faxing 011 483 3212 or emailing [email protected]
BE SURE TO SWITCH FOR THE RIGHT REASONS
To lure new clients into opening a transaction account, some banks are offering enticing extras – from discounted tablet computers and smartphones to free subscriptions to online, cellphone and telephone banking.
Some of these offers are on condition that your salary is paid into a new cheque account and that you switch your debit orders to the new account.
Excellent as these offers may be, make sure your decision to switch banks is carefully considered and based on sound reasons.
FNB is offering smartphones and tablets at reduced rates to new clients who open a cheque account with the bank. (The offer is also open to existing FNB account holders.) The beauty of FNB’s offer is that you not only stand to score a discount of up to 30 percent on a smartphone or tablet, but you also get to pay it off over 24 months interest-free.
Andrew Bladon, the head of sales at FNB’s Core Banking Solutions division, says the demand for the offer has far exceeded expectations.
Bladon says that since the offer was launched (in October last year), FNB has seen “significant month-on-month growth in new account sales volumes”.
He says the offer is aimed at giving clients access to “aspirational innovative technologies” at less than what the devices cost at retail outlets.
FNB’s offer should also be seen in light of its active promotion of day-to-day banking via electronic banking channels, such as the FNB Banking App, internet and mobile banking, as well as paying for goods with your card rather than cash.
“Our proposition is that a customer will never have to visit our branches unless they choose to,” Bladon says.
Absa offers new clients who open a transactional package the following:
* Free subscriptions to online, cellphone and telephone banking;
* An unlimited number of debit and stop orders;
* Overdraft facilities;
* A free garage card with no debit transaction fees;
* Free SMS notification; and
* A bundled offering, including the option to switch your home loan to Absa.
Arrie Rautenbach, the head of retail markets at Absa, says some banks throw in freebies such as free travel insurance. He says some of these come with a catch and advises you read the small print before signing up.
CAPITEC’s NEW CLIENTS ‘ARE FROM OTHER BANKS’
Capitec Bank, which is reportedly signing up 100 000 new clients a month, says most of its new clients are switching from other banks, as opposed to being previously unbanked clients.
Capitec offers just one account: a savings and transaction account in one.
Carl Fischer, the head of marketing and corporate affairs at Capitec, says during the 11-year-old bank’s “establishment phase” clients were predominantly previously unbanked. But since 2009, most of Capitec’s clients have come from other banks.
Fischer says that although the bank does not record the reasons clients switch to Capitec, feedback and research suggests that the simplicity of the bank’s offering compared with the complexity of their competitors’ offerings is the main reason clients are switching.
Capitec promotes its “simplified services and pricing structure”. The bank charges a fixed withdrawal fee of R3.75 (or R7 at other banks’ ATMs) instead of charging fees on a sliding scale. The penalty fee on unpaid debit orders is R3.75, versus R90 on most accounts at Nedbank, for example.
Arrie Rautenbach, the head of retail markets at Absa, says Absa has identified the key reasons for switching. He says transparency, language, customer needs, fees, skills, and bundled offers all play a part in a client’s decision to switch.
“If information on products and fees is not presented in a user-friendly way, it’s misinterpreted. Many South Africans don’t have English as a first language and have difficulty making sense of brochures or understanding the terms and conditions of a product. Bank employees are not always au fait with bank products and cannot advise clients with regard to the best banking options.”
Sugendhree Reddy, the director of banking products at Standard Bank, says clients often switch because they perceive they can get a better price elsewhere.
“Standard Bank encourages customers to take an interest in their bank charges and understand why they pay the fees they do.”
None of the big four banks – Absa, First National Bank, Nedbank and Standard Bank – would disclose the number of transaction accounts that they have lost over the past year. They say they are growing their new business, and new clients include those from other banks.