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Johannesburg - Traditional savings products seem to be outdated for the needs of young people.
According to the Banking Association of South Africa, the number of Mzansi accounts opened between December 2008 and June 2009 increased by 11%. Mzansi accounts are designed to provide banking services to entry-level, previously unbanked clients.
The majority of new account holders are younger than 16. However, the accounts do not seem to be used much - in the same period, the number of inactive accounts increased by 12%. Between 2007 and 2008, this figure remained virtually unchanged.
This could be because traditional savings products don't meet the needs of young people, who spend an increasingly amount of time online.
According to John Campbell, who heads Standard Bank's MiMoney electronic payment product where research has been done among focus groups of young people, they have a greater need for electronic payment methods.
"Today, children want to reserve movie tickets or buy books online, but they can only do so with a credit card. Savings products don't allow them to do that," he said.
The main culprit here once again is bank charges - an element that can be problematic for young people with limited funds.
"They will, for example, find that they have R100 in an account, but are often hesitant to use the card for an electronic transaction to pay a sum near to this amount, because of the cost of the transaction," Campbell said.
Standard Bank and First National Bank (FNB) are not prepared to disclose how many of their savings account holders are between 16 and 20, but they do agree that this market is very aware of bank charges.
"We encourage a culture of savings, so the bank charges for these products are very low. It's not a transaction account, but a pure savings product," Standard Bank banking products director Sugendhree Reddy said.
FNB regards the youth market as a growth area and finds that saving is important for this group, FNB consumer products head Shane French said.
However, Campbell said feedback from young people shows that these products don't give young people what they want, such as making electronic payments in small increments.
"This is a group where 'cash is king'. They would prefer not to carry large amounts of cash, but that costs less than doing a transaction with a card or having an account."
- Sake24.com
For more business news in Afrikaans, visit Sake24.com.