Banks back dormant Mzansi

Johannesburg – South Africa’s top commercial banks will continue opening Mzansi accounts, despite the large number of dormant accounts.

Research by the FinMark Trust indicates that about 42% of all Mzansi accounts, created in 2004 as a means of having a greater proportion of the population use banking services, are dormant.

The proportion could be even higher after the recent economic downturn in which almost a million people lost their jobs.

These accounts are controversial because they are not profitable for banks, and other banking operations have to subsidise them amid various complaints about bank charges.

On the face of it, the Mzansi project has been a great success in that six million accounts had been opened by the end of last year. The target that was set was 2.1 million accounts.

In 2004 only 43% of the adult population were using banking services and this figure has since risen to 63%.

In the FinMark investigation, an account was regarded as dormant if no deposit or withdrawal transactions had taken place for a year.

Account enquiries did not count.

Nedbank says it has 1.4 million Mzansi account holders, 30% or 420 000 of which are active.

Standard Bank declares that it has 1.1 million Mzansi accounts. FinMark reckons 800 000 are currently active.

Absa reckons its dormant Mzansi account figure corresponds more or less to the national average of 42%.

FinMark calculates that Absa has about 500 000 active accounts.

First National Bank (FNB) has 400 000 active Mzansi account holders, with the dormant figure estimated at 10%.

The Mzansi account was created in 2004 following negotiations between the banks and interest groups which led to the establishment of the Financial Sector Charter and Financial Sector Charter Council.

The role of both charter and charter council came to an end last year, although attempts were made to resuscitate it.

Meanwhile all the big banks have indicated they will continue carrying out the objectives of the charter to offer more accessible banking services.

Pieter du Toit, the head of FNB’s Smart Product House, says Mzansi accounts have a place in the market, but FNB does not see a great demand for them.

FNB’s Smart Account, which was designed for new entrants to the banking market, is more popular and being opened at a ratio of 9 to 1 compared with Mzansi accounts.

FNB says it currently has three million Smart account holders.

Du Toit said it would not affect FNB much if the Mzansi account was abandoned.

To be successful, accounts for lower-income groups need to be profitable on a basis of volume.

Sugendhree Reddy, head of banking products at Standard Bank, says Standard Bank remains committed to Mzansi accounts, but increasingly regards them as supplementary to the community banking initiatives being planned.

The bank is still opening some 40 000 Mzansi accounts a month.

From Mzansi the bankers have learnt a great deal about the market they want to serve, as well as the challenges to be overcome, says Reddy.

Saks Ntombela, CEO of Nedbank’s retail division, holds the same positive view.

Nedbank will not stop offering Mzansi accounts because so much has already been achieved through them, especially on the socio-political front, he says.

Ntombela predicts that the concept of a Mzansi account will advance and expand into other banking products.

Lawrence Twigg, chief executive of entry-level banking at Absa, says Absa still opens 6 000 to 7 000 Mzansi accounts each month, although the bank would prefer clients to use other banking products.

It is Absa’s experience that many clients use a Mzansi account for only one transaction.

This is not in line with the purpose of the account, said Twigg.

 -  Sake24