DAYLIGHT ROBBERY AT YOUR LOCAL ATM

Well, well, well - I can't say that I am terribly surprised. Reports evidence that
South African Bank charges are amongst the highest in the world, so the fact that they are overcharging us on the usage of ATM machines is not surprising at all. What really gets up my left nostril though, is when the ATM outside of the bank is "Out of Order" so you have to go into the bank to withdraw and/or deposit funds and they charge you extra for this. Perhaps it is time that we all just stopped using banks - can't see it happening in reality, but for a brief moment there it was a delicious thought!

Regards
Nikki


Lyse Comins
November 30 2006 at 05:12AM

While automated teller machines (ATMs) were initially supposed to be an initiative to lower the cost of banking for customers, it seems banks are using the system to make even greater profits.

This was one of the issues raised by members and associates of the eThekwini Civic Forum (ECF) - which represents 42 civic and ratepayer organisations in the greater eThekwini Municipality - in a submission to the Competition Commission's inquiry into bank fees in Durban on Wednesday.

The ECF called for the government to gather an international reference group to investigate the pros and cons of current bank charges and beef up regulatory control over the sector, which desperately needed to become "pro-poor".

ECF associate, accountant Basil Meintjies, complained to the commission using the illustration of Absa. He claimed banks were "profiteering" from fees charged for ATM transactions

Meintjies said: "ATMs were designed to lower the cost of doing business. I have investigated them and am convinced that ATM fees have become a profit-making facility, and not a way of reducing costs.

"How much does it cost Absa to call up a bank balance to view it on the screen - the R1 that they charge when there is no printing or ink involved?"

Meintjies said the bank's flat fee of R3 plus 90 cents per R100 for every withdrawal had been "designed to make a profit and not simply to cover costs".

He also questioned why banks were allowed to charge R1.05 plus 90 cents for every R100 for cash deposits. "Excess funds in customers' accounts are pooled (by the bank) to fund and invest in other money-making activities, such as extending credit.

"A small balance is maintained to manage day-to-day transactions. The benefit of this is kept by the bank and not passed on to customers."

He said banks could use R180-million out of R200-million invested in 100 000 individual accounts to extend credit in the form of mortgage bonds, vehicle finance and micro-loans, while retaining R20-million to cover customer withdrawals. However, the benefit of massive profits made from micro-loans, attracting as much as 60 percent interest, were not passed on to customers.

ECF secretary Siva Naidoo said it was critical that banks developed and implemented a "banking charge norm", which would allow for special bank fee arrangements for poor consumers.

"There should be minimal or no bank charges for some beneficiaries, such as social assistance beneficiaries and the youth," Naidoo said.

"The government must beef up its regulatory oversight over the banking sector, which, in our view, should be pro-poor and embrace international best practice. The ECF is of the firm view that the relevant government authorities should gather an international reference group to consider and comment on the merits and weaknesses of bank charges," Naidoo said.

He called on banks to become socially responsible by installing ATMs in impoverished areas and supporting financial literacy programmes. This would reduce the high cost of transportation to conduct banking, and economically empower consumers.

"Poor people from townships and rural areas view banks as 'foreign', stolid institutions. People then generally interpret banking facilities as 'taking our money'," Naidoo said.

A former FNB bank manager said it was true that the poor were being exploited by banks.

"Because of the ignorance of the masses, they are charged at the highest fees because they don't have negotiating power, whereas the wealthy are able to negotiate the fine rates and are actually being subsidised by the poor.

"The bank's profit is derived from what people leave in their accounts, whereas the wealthy tend to maximise their returns on their investments," he said.


This article was originally published on page 3 of Pretoria News on November 30, 2006