Mzansi accounts flop
Fin24

Mzansi accounts flop

2010-06-09 07:50

Johannesburg - Commercial banks created the Mzansi account for lower-income groups five years ago, but about 42% of all these accounts are now dormant.

Commercial banks no longer keep statistics of Mzansi account holders. At Mzansi’s height more than 6m people had such accounts.

What was initially extolled as a success story of service to the so-called “unbanked” sector of the economy now falls short of expectations as it is unprofitable for commercial banks to operate this type of account.

On Tuesday at a function on banking services Professor Gerhard Coetzee, a specialist adviser on inclusive banking services at Absa, said half of the Mzansi account holders had moved to other bank accounts.

For the other half the account simply remained too expensive.
The account started off a low-cost base, but banks progressively increased the fees.

Lawrence Twigg, managing executive of entry-level banking at Absa, said the number of Mzansi account holders continues to decline. Banks no longer market these accounts.

The account did not meet its original objective because most clients opened only the one account.

Banks had hoped that opening the first Mzansi account for a client would lead to the use of other banking services, such as personal loans and credit cards.

On its own the account proved unprofitable to operate, especially because it was characterised by only one or two transactions a month.

Banks have since shifted their focus to other services targeting lower-income groups. Coetzee says an example of this has been Absa's “Step-up” account plan.

In terms of this plan unsecured loans are made to clients. If R400 is advanced and repaid, a further loan of R800 is advanced.

According to Coetzee this plan has not worked either. Bad debts eventually rose to 96%, with a cost ratio of over 100%.

Absa is now focusing more extensively on the unbanked market by means of the Allpay system, in terms of which banking services are supplied to people who receive social grants.
According to Twigg there are currently 2.1m recipients per month, about 1m of whom do not have banking services.

- Sake24.com

For business news in Afrikaans, go to www.sake24.com.

Comments
  • Margaret - 2010-06-09 08:44

    Probably many of them have moved to Capitec, who have lower charges that even the Mzansi accounts, plus they pay decebt interest.

  • Vico - 2010-06-09 09:02

    Trust the banks to always GROW their profits...

  • Joe - 2010-06-09 09:05

    There are underlying inefficiencies in banking that makes banking the poor very difficult. This is caused by both internal issues in banks, demands from shareholders, but also due to certain issues with government. The next three years will see huge shifts in the way people do everyday banking, payments and purchases which will allow for the more efficiencies that will lead to banking services to poorer people. These solutions will come from logistics, technology and process efficiencies. Watch this space.

  • leweng - 2010-06-09 09:28

    The reason for the low take up rate, dormancy etc is due to the fact that Mzansi acc is very expensive to low income customers. I dont entirely blame banks owing to the fact that Mzansi is expensive to maintain. I think FNB/ ABSA "eWallet account" is better than Mzansi acc

  • Adams - 2010-06-09 09:50

    Ha,have to love the honesty,they offered the accounts to the poor, hoping to tempt them to take out other loans and credit cards so that they suck them in and make a killing off the interest and charges. This is why to a certain extent, the banks deserve what they get with the level of bad debt.

  • Foom - 2010-06-09 10:29

    "For the other half the account simply remained too expensive. The account started off a low-cost base, but banks progressively increased the fees." And that says it all. They flopped because the banks made sure they would with gouging and exploitation, all the while crowing about how responsible they are.

  • Riaan - 2010-06-10 07:33

    Perhaps the accounts were just doomed from the start. Lending people R400 and expecting it back? With money from where? Edgars accounts? Wonder how much they are loosing?

  • FAILURE - 2010-06-10 08:19

    SEEMS TO BE ON THE SIDE OF THE BANKS, WITH TOO HIGH FEES AGAIN

  • garifuna - 2010-06-10 14:11

    Even the Competition Commission & Finance Minister are un able to do anything about this cartel.What a shame!

  • Public enemy#1 - 2010-06-11 09:17

    These accounts were created for low income groups but banks hoped the account holders will service other facilities. Where will these low income groups get the money to pay back loans and credit cards. And didn't this type of restless lending lead to the recession in the first place. Banks are merely in the game to reap huge profits so they can pay their CEO's exorbitant premiums! No better than Pirates!!!

  • chameleon1 - 2010-06-14 10:11

    Like Margaret said if you want to make use of a bank,go to Capitec for a savings account ,you receive great interest and bank charges are reasonable.

  • Paul - 2010-06-14 21:58

    Booo-Hooo. Let's get all teary-eyed for the Big-4 trying to rip off the poorest of the poor. Following Joe's comment - Go Capitec Go!!!

  • khahliso - 2010-07-16 10:31

    theres a competittion that was running on june they called me and told me that i have won a get away trip the numbers are 0310011001

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