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2023-01-23 at 16:21 #390395Nat QuinnKeymaster
In 2006, Absa, FNB and Capitec banded together to pioneer immediate interbank payments – meaning you could transfer money between two competing banks and have the funds reflect instantly.
Immediate payments have multiple uses but are particularly important to limit the risks of carrying cash, and to avoid scams when waiting three days for funds to clear via regular EFT isn’t an option.
From the outset, most banks saw this as a premium offering with inherent risks and then transferred this as a cost to the client. And at least one of the founding members still charges up to R49 for the privilege.
Although the service is now 17 years old, banks still charge more for this transaction than almost any other transactions, and most don’t include any free immediate payments in monthly transaction bundles.
Despite this, interest in this form of payment is higher than ever before – and it’s growing rapidly.
The Payments Association of South Africa (PASA) says RTC volumes increased by 66% in 2021 “due to the increased demand for lower-value smaller transactions cleared in real-time”.
Statistics also show that RTC transactions of R3,000 or lower increased from 60% in 2018 to over 80% in 2021.
The amount of money flowing through this channel is also significant. According to BankservAfrica, South Africans transferred more than R105 billion using immediate payments in 2021 – an increase of R25 billion from the previous year.
Given most banks don’t include these fees in monthly transaction bundles, they receive payment for every RTC transaction.
The potential revenue from these transactions is not insignificant, either.
PASA previously said banks process as many as 49 million RTC payments in a calendar year. At the low-end average across South Africa’s big five banks in 2023, this would put the money received by all banks in RTC fees at R439 million for the year. Banks would receive about R1.6 billion per year in RTC fees at the high-end average.
Banks have previously denied that these fees exist to make money. They claim they are forced to charge premium rates for immediate transactions due to operational requirements and fraud prevention measures.
However, none can seem to agree on how much these operational requirements should cost the customer.
Banks are ‘forced’ to charge premium rates for RTC
Historically, Capitec offered the cheapest RTC services in South Africa at R7.50. A Capitec spokesperson previously said they decided to keep these fees low to remove risks associated with carrying cash.
“We also believe we have a role to play in the furthering of the country’s digital economy through this affordable fee, which makes it an accessible payment option for millions of South Africans,” the spokesperson said.
Absa, which charges R10 for RTC payments under R1,000, and R49 for those above, is still the most restrictive and expensive of the big five banks.
In 2021, an Absa spokesperson told Business Insider SA that immediate inter-bank payment fees “cover the costs associated with inter-bank real-time clearing, as well as the additional fraud prevention measures we have implemented on this transaction type.”
Some banks also argued that although they charge a premium for RTC payments, they have introduced alternative real-time payment options at lower costs. Yet the surge in popularity of immediate payments suggests they’re more popular than other methods or solutions.
Immediate payment fee changes in 2023
Most South African banks haven’t changed their fee structures for immediate payments in 2023.
The most significant policy change comes from FNB, which has adopted a flat rate fee of R7. Previously, FNB’s RTC fee varied between R8 and R45, depending on the customer’s account type.
FNB’s drop is now 50c cheaper than Capitec’s R7.50 – 2021’s lowest RTC fee – and is in line with TymeBank’s flat R7 fee.
Discovery Bank also offers a flat fee, which varies according to the bank account. Its entry-level savings account requires customers to pay R35 for this transaction, while mid-tier transaction accounts charge R10. Premium Discovery Bank accounts include these transactions free in bundles.
African Bank charges R10 for an immediate transfer – a number not tracked when Business Insider SA first conducted this research in 2021.
Absa, Standard Bank, and Nedbank have not changed their immediate payment fees since 2021 and still charge a premium for these transactions.
Standard Bank has, however, lowered the limit for their premium rate – customers now pay R50 for immediate payments above R2,000, whereas previously, this rate applied for transactions above R3,000.
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