News

Interchange fee cuts a hard hit to S African banks' bottom lines

They don't go into effect until Jan. 1, but Nedbank has already done the math and found that the reserve bank's new fee structure will cause significant losses to profitability.

August 5, 2014

The Reserve Bank of South Africa will be imposing new ATM fee cuts starting Jan. 1, 2015. But Johannesburg-based Nedbank is already counting up the losses, according to a report by Business Day Live.

When the FI — South Africa's fourth largest — announced its 2014 first half earnings today, it included a reckoning of income the bank would have lost had the fee cuts already gone into effect.

Based on ATM use for the first half of the year, Nedbank said earnings would have taken a hit of 88 million rand ($8.2 million), or about 19 percent, on earnings of 4.9 billion rand ($456 million).

The new fee schedule comes in response to a study by the reserve bank indicating that transactional and interbank charges in South Africa were higher than they would be if the environment were competitive.