South African Bank Fee Charges!

I carried out a research project on:

BANKS APPEAR TO BE GENERATING MORE INCOME FROM CHARGING FEES THAN FROM THEIR MORE TRADITIONAL FORMS OF INCOME

Abstract:
Banks’ strategy is changing in focus from traditional (on-balance sheet) to non-traditional (off-balance sheet) forms of business. Fee charges fall under the category of non-interest income (or non-traditional bank business) which is replacing interest income (or traditional bank business). A comparison between non-interest and interest income is undertaken for the big four banks of South Africa, which confirms that this shift is taking place. Competition is also analyzed based on an international comparison of fees and market concentration. Within the big four banks of South Africa there is very little competition in pricing of fees.

Basically the results showed that the banking environment in South Africa is not competitive in the national payment system (NPS). In South Africa, five of the biggest banks account for 89.2 percent of the value and a further 97.7 percent of the volume within the payment system, showing their dominance of the payment system. Therefore this case shows the clear lack of contestability in the custodian process, which definitely raises fears of cartel arrangements (or Collusive oligopoly).

I mention this because today the Competition Commission’s banking enquiry public hearings into bank fees and the national payment system (NPS) began. Nedbank was the first to present their views. It was interesting that they spoke about reducing their fee charges (but wait last year they charged the highest fees)! So essentially all Nedbank’s reduction means is that they are now in line with what other banks are charging!

Figure 7: Country Comparisons of Number of Banks, GDP Per Capita and Population Density Per sq Km

 

An interesting trend captured by figure 7 is that the developed countries have a lot more banks in their financial systems than developing countries. It is also interesting to note that South Africa is one of the more developed countries of the developing countries and has the least amount of banks after Morocco, indicating that it is perhaps under banked.

Price History of New technology

The PS3 has not been released yet in the US, so it will still be a while before it hit’s the South African market. I thought it would be interesting though to blog about the price of the XBOX360, which is R3699.00 for the Pro System (at Makro). Games seem to range from about R400 – R600. I thought this would be a nice way to keep a record of the current release price. This could therefore allow for future comparisons, for example; how the price is reduced overtime, as well as whether or not competition will have an affect on the pricing of both consoles. Perhaps giving an indication of when the best time is to purchase these new products.

Sure time of year and other releases of better technology come into play and the opportunity cost is going to be small (and a real study would be very complex). It is still something that has always interested me. The same can be said about Microsoft’s Zune player soon to be released vs. the Ipod (R2995.00 for 30GB).

Above is a graph on the pricing of the playstation 2 from 2000 to 2006. As expected the price has dropped over time, with it taking a big dive because of the looming release of the playstation 3 in 2007!!! I also looked at the price of the first 10GB ipod release in 2001 which was $499 whereas in 2005 the release price of the 80GB ipod was $399. But in the years between this the top prices have been around $499 for the top capacity ipod. Perhaps a conclusion from this is that technology prices for new release products are quiet similar over the years. However when is the cheapest time to purchase these products?