This week, I have been sorely tested by my bank. There have been phone calls and emails and smses demanding yet another proof of address, and some documented proofs of income*.
*This happened after a request made for a bank-stamped set of bank statements. A request made over 2 weeks ago. Which is still outstanding. But I must get the proof of address to them immediately.

Because clearly, money laundering is now South Africa’s real issue. Forget that 67% of South Africans remain unbanked and locked out of the formal financial system – the big problem is all those account holders whose last utility bill is now 18 months old.

Oh – and they want my fingerprints for biometric verification directly linked with the Department of Home Affairs.

Because my bank want to keep me secure and safe from fraud.

Here’s an angry letter about it:

You are LYING, person behind the sales desk. Biometric verification has NOTHING to do with my security and EVERYTHING to do with your fraud insurance bill. 

The irony is that I pay for the privilege of being incessantly bothered by the call centre. And while I would love to revert to cash – all manner of regulatory entity won’t allow that. SARS in particular.

In the counting-to-ten breathing pause that follows those phone calls, I remind myself that this is not really what the bank wants to be doing. There are two other factors in play:

1. FICA. Even though September 9/11 did not happen here. And even though no terrorist is going to feel any shame about getting a fake utility bill. But still – FICA is probably less responsible for the admin than one might think. Because…
2. The Insurance Houses. Who are tired of paying out for fraudulent transaction claims, and have decided to regiment from the outside just what the bank must be doing in order for the bank to continue to be covered against fraud.

My bet: insurers are far and away more responsible for the amount of administration that banking now entails. After all, governments just bumble along and occasionally fine banks long after the fact – which just becomes part of the cost of business.

It’s insurers who have money to lose and income to protect. And no bank can afford to lose their fraud insurance (in fact, I’m pretty sure that having it is a regulatory requirement). And even if it’s not about losing the insurance altogether, competition between the banks probably means that they’re not willing to hike their banking fees to cover the higher cost of less-administrative insurance.

So my thought is: if this is going to be the general trend in banking, then we should just find the cheapest bank to use. And that bank is clearly Capitec – because here is this awesome banking infographic that I found on Moneysmart:

I realise that the above is just a comparison of the lower-end banking products. And it doesn’t really consider rewards programs*. But still.
*By my reading of the above, you’d have to collect R1,000 worth of ebucks to make up the cost differential between FNB and Capitec.  Which works out to R40,000 worth of retail swipes in any given year – and given that there are only R36,000 in the model above…

Although what happens when you head into the Platinum/Private-Banking realm? Because Capitec doesn’t play in that field. In fact, Capitec only really plays in the Global One account field (it’s how they keep their costs so low).

So I have some thoughts on that point. Mostly, I want to ask the question: “Why do banks have prestige banking?”

And the key is in the word “prestige”.

To Be Continued…

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.