Nepru zooms in on high bank charges

IN a bid to address the disconcerting issue of high bank charges, members of the public have been advised to shop around for cheaper services among the existing financial institutions based on their needs.

Another immediate solution, according to the Namibian Economic Policy Research Unit (Nepru), would be encouragement of increased competition within the local banking industry. Namibia has been plagued with continuous consumer complaints against high bank fees charged by the country’s four commercial banks – FNB, Standard Bank, Nedbank and Bank Windhoek.This hot issue reached the Parliamentary Standing Committee on Economics, Natural Resources and Public Administration, which carried out an investigation last year.On this note, Nepru has called on the powers that be to solve the issue in a way that does not weaken the stability of the financial system.Nepru’s latest policy brief touches on this sensitive matter and compares retail banking charges in Namibia, South Africa and Botswana.Also banking charges vary between the three countries, with no consistency as to who charges the highest or the lowest.Although charges also vary widely depending on different transactions, it was proven that in all three countries withdrawals at the counter cost more than those at ATMs, and that people are charged more for using other banks’ ATMs than their own.Effective retail banking charges incurred by individuals also differed based on their usage and according to their transactions.The research institute said a formal and in-depth investigation into the overall cost structure of retail banking in Namibia needed to be carried out in order to determine whether charges levied by commercial banks in the country were unjustifiably high.However, according to Nepru, the strong link between Namibian banks and their South African counterparts led to variant business practices which resulted in higher charges.The paper reveals that lack of information and statistics makes it harder for bank users to make informed decisions.”For consumers to effectively exercise the option of choice, one key issue that should be addressed is the lack of comparability among publicly available information on bank charges.This will require the revamping of the Namibia Consumer Lobby to collect disparate information, compare and present it in a manner that consumers can understand,” suggested Nepru.Nepru said banks justified charges on covering costs of providing retail services to their customers; and added that high charges were likely to continue.”High banking costs also persist if there are low levels of competition in the banking industry due to less pressure to innovate.In addition, the relatively low population size and density in Namibia makes it difficult for banks to benefit from economies of scale and implies that a higher per capita cost of bank service provision exists…”The Bank of Namibia has said it cannot directly control retail banking charges, but would rather issue directives which require commercial banks to be upfront with customers about the costs attached to certain financial products and services.Nepru policy briefs are issued to help stakeholders understand topical issues through research and statistics, and give direction to decision-makers on the various issues.The banking sector is currently hosting its first Banking Week which aims at creating consumer education.Finance Minister Saara Kuugongelwa-Amadhila last week challenged Namibian citizens to be financially prudent.”It comes as a surprise that many people do not question the lack of pricing transparency by their banks.The lack of information is what we could address with this initiative.Namibia needs consumers who take informed decisions and a financial sector that facilitates and encourages people to use their services,” she said.Namibia has been plagued with continuous consumer complaints against high bank fees charged by the country’s four commercial banks – FNB, Standard Bank, Nedbank and Bank Windhoek.This hot issue reached the Parliamentary Standing Committee on Economics, Natural Resources and Public Administration, which carried out an investigation last year.On this note, Nepru has called on the powers that be to solve the issue in a way that does not weaken the stability of the financial system.Nepru’s latest policy brief touches on this sensitive matter and compares retail banking charges in Namibia, South Africa and Botswana.Also banking charges vary between the three countries, with no consistency as to who charges the highest or the lowest.Although charges also vary widely depending on different transactions, it was proven that in all three countries withdrawals at the counter cost more than those at ATMs, and that people are charged more for using other banks’ ATMs than their own.Effective retail banking charges incurred by individuals also differed based on their usage and according to their transactions.The research institute said a formal and in-depth investigation into the overall cost structure of retail banking in Namibia needed to be carried out in order to determine whether charges levied by commercial banks in the country were unjustifiably high.However, according to Nepru, the strong link between Namibian banks and their South African counterparts led to variant business practices which resulted in higher charges.The paper reveals that lack of information and statistics makes it harder for bank users to make informed decisions.”For consumers to effectively exercise the option of choice, one key issue that should be addressed is the lack of comparability among publicly available information on bank charges.This will require the revamping of the Namibia Consumer Lobby to collect disparate information, compare and present it in a manner that consumers can understand,” suggested Nepru.Nepru said banks justified charges on covering costs of providing retail services to their customers; and added that high charges were likely to continue.”High banking costs also persist if there are low levels of competition in the banking industry due to less pressure to innovate.In addition, the relatively low population size and density in Namibia makes it difficult for banks to benefit from economies of scale and implies that a higher per capita cost of bank service provision exists…”The Bank of Namibia has said it cannot directly control retail banking charges, but would rather issue directives which require commercial banks to be upfront with customers about the costs attached to certain financial products and services.Nepru policy briefs are issued to help stakeholders understand topical issues through research and statistics, and give direction to decision-makers on the various issues.The banking sector is currently hosting its first Banking Week which aims at creating consumer education.Finance Minister Saara Kuugongelwa-Amadhila last week challenged Namibian citizens to be financially prudent.”It comes as a surprise that many people do not question the lack of pricing transparency by their banks.The lack of information is what we could address with this initiative.Namibia needs consumers who take informed decisions and a financial sector that facilitates and encourages people to use their services,” she said.