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South African Bank exec admits British banks charge penalties
http://transcripts.businessday.co.za....pl?1184023721
Posted: 2007-07-09 23:58 Questions continue on bank fees
Presenter: Lindsay Williams Guest(s): James Fowle
The Competition Commission inquiry into bank charges continues, and it’s First National Bank’s turn to give their view. Classic Business Day gets pricing executive James Fowle on the line from FNB
LINDSAY WILLIAMS: James, where are we now in terms of the Competition Commission’s inquiry into banking fees?
JAMES FOWLE: There’s been four sets of hearings at the Competitions Commission - the first looked at ATMs, the second one looked at cards and interchange, the third set looked at the national payments system, and today we looked at pricing and bank charges.
LINDSAY WILLIAMS: Which area of pricing?
JAMES FOWLE: Non-interest revenue - that’s all the fees and charges relating to transactions…
LINDSAY WILLIAMS: What came out? It was a public hearing I understand - have all the banks given their depositions?
JAMES FOWLE: No, the hearings go on tomorrow - I think Absa have yet to make their submission for the pricing and market power hearing. At today’s hearing FNB explained to the panel our view on pricing, how we go about pricing, and we talked about churn and switching in South Africa. Obviously we don’t get feed back from the panel, but FNB’s view is that there’s no impediment to competition - there’s no evidence of collusion whatsoever in South Africa, and in fact the technical team of the Competition Commission have been quoted as saying exactly that there’s no evidence of collusion in the setting of fees and charges in South Africa.
LINDSAY WILLIAMS: Rob Shuter from Nedbank Retail said: “We face intense competition not only from bigger banks for example FNB, but also from new entrants including niche banks and retailers. Consumers have more choice than ever before, and there’s no doubt that competitive forces have had a strong hand in reshaping our business.” Is the message coming across then to the Competition Commission that despite the fact that there’s only four banks and despite the fact that charges are supposedly high compared to international standards that there’s no cartel-style arrangement between the four of you?
JAMES FOWLE: Absolutely. I can’t speak for the Competition Commission, but their technical team has definitely said that there’s no evidence of collusion. In terms of South African charges being higher than those internationally I think limited comparisons have been done - they haven’t looked at the whole set of pricing and brought in interest and penalty fees, and they haven’t compared us against other developing nations which I think is important - so when we are compared with South American countries or other African countries South Africa’s pricing is really not excessive.
LINDSAY WILLIAMS: Did you and your colleagues view that announcement last week on Sky News where one of their reviewers came across an article in a UK newspaper that there’s going to be a review of certain charges at certain UK banks, and that refunds are going to have to be made by those banks? I don’t know if you saw that, but let’s say the Competition Commission decided the big four banks have been charging a little bit too much could it get to the point where you have to pay back some money?
JAMES FOWLE: There would be a legal process first, and the outcome of that could theoretically be some sort of a payment. In the UK situation what happened there is the banks were charging very high penalty fees - they could charge up to £35 for one returned item, and that’s significantly higher than it’s been in South Africa. The UK Office of Fair Trade said that they will investigate any charges greater than £12 (pounds ) so there’s quite a big discrepancy between what the banks were charging and what they’ve said is fair. There have been no such rulings in South Africa, and in fact if you look at our fees - and particularly on the penalty side we - are significantly lower than the penalties being charged there.
LINDSAY WILLIAMS: One last question that’s purely speculative - and I realise that you are in a position where you can’t really speculate on this matter - but is there a chance that the National Credit Act will increase competition in the market which I think we all agree with, and therefore is there a chance that one of the major banks breaks ranks and says they’re going to cut rates and everybody else follows?
JAMES FOWLE: I would like to say that FNB has been doing that for quite some time - ours has been a break-out strategy in terms of bank charges, where back in 2002 we slashed subscriptions for internet and telephone banking - and we have continued to make other advances, and particularly with the electronic channels. As recently as June 2007 we made cellphone banking completely free - so individuals pay absolutely nothing for as many transactions as they want through cellphone banking. Similarly through our telephone banking channel all transactions are free, and we made cash deposits at our ATMs are free. So I think it’s already happening and FNB is leading the pack in that regard. If customers are willing to use electronic channels - which is very much our strategy - we will reward them with lower fees, and of course we cash in on cost efficiencies and attract new customers to FNB.
LINDSAY WILLIAMS: What’s the next step, and when is this inquiry going to be bound up into a lovely document with the findings published?
JAMES FOWLE: Today was our last formal hearing, but they may call us to give additional information if necessary. The next stage is a report to be issued by the Competition Commission - we expect that later in 2007.
Posted: 2007-07-09 23:58 Questions continue on bank fees
Presenter: Lindsay Williams Guest(s): James Fowle
The Competition Commission inquiry into bank charges continues, and it’s First National Bank’s turn to give their view. Classic Business Day gets pricing executive James Fowle on the line from FNB
LINDSAY WILLIAMS: James, where are we now in terms of the Competition Commission’s inquiry into banking fees?
JAMES FOWLE: There’s been four sets of hearings at the Competitions Commission - the first looked at ATMs, the second one looked at cards and interchange, the third set looked at the national payments system, and today we looked at pricing and bank charges.
LINDSAY WILLIAMS: Which area of pricing?
JAMES FOWLE: Non-interest revenue - that’s all the fees and charges relating to transactions…
LINDSAY WILLIAMS: What came out? It was a public hearing I understand - have all the banks given their depositions?
JAMES FOWLE: No, the hearings go on tomorrow - I think Absa have yet to make their submission for the pricing and market power hearing. At today’s hearing FNB explained to the panel our view on pricing, how we go about pricing, and we talked about churn and switching in South Africa. Obviously we don’t get feed back from the panel, but FNB’s view is that there’s no impediment to competition - there’s no evidence of collusion whatsoever in South Africa, and in fact the technical team of the Competition Commission have been quoted as saying exactly that there’s no evidence of collusion in the setting of fees and charges in South Africa.
LINDSAY WILLIAMS: Rob Shuter from Nedbank Retail said: “We face intense competition not only from bigger banks for example FNB, but also from new entrants including niche banks and retailers. Consumers have more choice than ever before, and there’s no doubt that competitive forces have had a strong hand in reshaping our business.” Is the message coming across then to the Competition Commission that despite the fact that there’s only four banks and despite the fact that charges are supposedly high compared to international standards that there’s no cartel-style arrangement between the four of you?
JAMES FOWLE: Absolutely. I can’t speak for the Competition Commission, but their technical team has definitely said that there’s no evidence of collusion. In terms of South African charges being higher than those internationally I think limited comparisons have been done - they haven’t looked at the whole set of pricing and brought in interest and penalty fees, and they haven’t compared us against other developing nations which I think is important - so when we are compared with South American countries or other African countries South Africa’s pricing is really not excessive.
LINDSAY WILLIAMS: Did you and your colleagues view that announcement last week on Sky News where one of their reviewers came across an article in a UK newspaper that there’s going to be a review of certain charges at certain UK banks, and that refunds are going to have to be made by those banks? I don’t know if you saw that, but let’s say the Competition Commission decided the big four banks have been charging a little bit too much could it get to the point where you have to pay back some money?
JAMES FOWLE: There would be a legal process first, and the outcome of that could theoretically be some sort of a payment. In the UK situation what happened there is the banks were charging very high penalty fees - they could charge up to £35 for one returned item, and that’s significantly higher than it’s been in South Africa. The UK Office of Fair Trade said that they will investigate any charges greater than £12 (pounds ) so there’s quite a big discrepancy between what the banks were charging and what they’ve said is fair. There have been no such rulings in South Africa, and in fact if you look at our fees - and particularly on the penalty side we - are significantly lower than the penalties being charged there.
LINDSAY WILLIAMS: One last question that’s purely speculative - and I realise that you are in a position where you can’t really speculate on this matter - but is there a chance that the National Credit Act will increase competition in the market which I think we all agree with, and therefore is there a chance that one of the major banks breaks ranks and says they’re going to cut rates and everybody else follows?
JAMES FOWLE: I would like to say that FNB has been doing that for quite some time - ours has been a break-out strategy in terms of bank charges, where back in 2002 we slashed subscriptions for internet and telephone banking - and we have continued to make other advances, and particularly with the electronic channels. As recently as June 2007 we made cellphone banking completely free - so individuals pay absolutely nothing for as many transactions as they want through cellphone banking. Similarly through our telephone banking channel all transactions are free, and we made cash deposits at our ATMs are free. So I think it’s already happening and FNB is leading the pack in that regard. If customers are willing to use electronic channels - which is very much our strategy - we will reward them with lower fees, and of course we cash in on cost efficiencies and attract new customers to FNB.
LINDSAY WILLIAMS: What’s the next step, and when is this inquiry going to be bound up into a lovely document with the findings published?
JAMES FOWLE: Today was our last formal hearing, but they may call us to give additional information if necessary. The next stage is a report to be issued by the Competition Commission - we expect that later in 2007.
