News

ATM fee cuts will cost S African banks millions

April 25, 2014

South African banks could lose millions due to a decision by the nation's reserve bank to cut interchange fees for ATMs, a report by Business Day Live said. The idea is that lower interbank fees will remove the need for banks to build out large, redundant fleets to serve their customers.

In the past, South African banks charged fixed fees for off-us withdrawals, balance inquiries and declined transactions. An additional, variable fee was charged for cash transactions based on the withdrawal amount.

As of April 1, the fee for declined transactions dropped from 1.10 rand to .94 rand (10 cents to 9 cents) and the fee for a balance enquiry dropped from 1.65 rand to 1.33 rand (16 cents to 13 cents). The flat fee for a cash withdrawal was cut from 3.48 rand to 3.25 rand (33 cents to 31 cents); the variable rate declined from 0.65 percent to 0.53 percent.

Reduced POS cash-back fees were mandated by the reserve bank, as well. Starting in January 2015, transactions will incur a single fixed fee of 1.11 rand (10 cents) as opposed to the current negotiated fee that ranges up to 1.20 rand (11 cents).

The commission hopes that setting POS fees lower than ATM fees will encourage consumers to get cash in-store rather than at an ATM, the report said.

Payments Association South Africa CEO Walter Volker said that interoperability would save the banks money in the end. "If one participant bank has infrastructure like ATMs the other banks don't need to invest and deploy in the same infrastructure," he said.

Volker said it was hoped that savings would be passed on to bank customers.