# General Business Category > Business Finance Forum >  Bank Charges

## Graeme

Bank Charges - the "Aha!" Factor

A while ago, part of our vocabulary included the "Aha!" factor; used, for example, when some calculated practice of maximising profits by giving the locked-in client a screwing  was believed to exist.

An article in the latest issue of FINWEEK presenting the results of a rather fascinating  forensic investigation into bank charges reminded me of this.  It turns out that there is a Dallas-based consultancy called Carreker which entered the South African market about five years ago, offering its services to the Big Four banks in helping them to raise their "non-interest revenue".  According to FINWEEK, Carreker's website states, in consultants' gobbledegook, "Carreker's Revenue Enhancement practice helps financial institutions meet their revenue and customer relationship objectives through a carefully staged sequence of emerging best practice opportunities.  Tailored to the unique needs of your organisation, these opportunities are timed at a cadence to build long-term, sustained benefits and growth."   All of the S.A. Big Four admit to having had various degrees of engagement with Carreker.

Says a former banker; "They (Carreker) go around the world looking at global best practice and when they enter new territories basically advise new clients on fees they hadn't previously considered."   Best practice!  

"Aha!"

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## Dave A

I'm surprised they need external consultants. Our banks are pretty innovative on the fees front already.

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## Graeme

You know what it is like when you turn over a stone and all sorts of things scurry about, blinking in the light of day.   As the American Sub-Prime scandal proceeds, more and more dirty washing is emerging from their financial system.

The latest in a quote from "The Economist":   "For those who stop short of stuffing their mattress with banknotes, money market funds are meant to be the next best thing.  They invest their clients' money in supposedly safe and liquid short-term instruments.  But as America's mortgage malaise has spread with shocking alacrity from one corner of the credit markets to another, even these staid creatures have been sent into spasms."

Some of these money market investments have been in "collateralised debt obligations" (CDO's) and it now turns out that the "assets" backing this paper are comprised not only of mortgages of dubious value, but also "assets" such as credit card receivables!  American ratings agencies (Moody, Fitch, et al) which have been issuing gradings of their investment value are now reported to be hurriedly re-evaluating many of these.

When the day of reckoning arrives, and American politicians will see that it does,  I believe that these ratings agencies may well become the subject of  those terrifying "class action" lawsuits that Americans are so fond of; but this time for damages running into figures that are normally dealt with by astronomers.

Most of my spare cash is in South African money market funds, which I always thought of as ultra safe, but I am now beginning to wonder what tricks they might be getting up to here - monkey see, monkey do.  I don't believe that we have a mortgage-backed securities problem here, the S A Reserve Bank would have been on to that one, but  one does wonder to what extent the Reserve bank is looking at the safety of SA money market funds' investments.  Some reassurance by Mboweni would be a very good thing.  Cash has been pouring into these funds as many S A investors bail out of equities.

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## World_Of_Elites

> Bank Charges - the Ã¢â¬ÅAha!Ã¢â¬Â Factor
> 
> A while ago, part of our vocabulary included the Ã¢â¬ÅAha!Ã¢â¬Â factor; used, for example, when some calculated practice of maximising profits by giving the locked-in client a screwing  was believed to exist.
> 
> An article in the latest issue of FINWEEK presenting the results of a rather fascinating  forensic investigation into bank charges reminded me of this.  It turns out that there is a Dallas-based consultancy called Carreker which entered the South African market about five years ago, offering its services to the Big Four banks in helping them to raise their Ã¢â¬Ånon-interest revenueÃ¢â¬Å.  According to FINWEEK, CarrekerÃ¢â¬â¢s website states, in consultantsÃ¢â¬â¢ gobbledegook, Ã¢â¬ÅCarrekerÃ¢â¬â¢s Revenue Enhancement practice helps financial institutions meet their revenue and customer relationship objectives through a carefully staged sequence of emerging best practice opportunities.  Tailored to the unique needs of your organisation, these opportunities are timed at a cadence to build long-term, sustained benefits and growth.Ã¢â¬Â   All of the S.A. Big Four admit to having had various degrees of engagement with Carreker.
> 
> Says a former banker; Ã¢â¬ÅThey (Carreker) go around the world looking at global best practice and when they enter new territories basically advise new clients on fees they hadnÃ¢â¬â¢t previously considered.Ã¢â¬Â   Best practice!  
> 
> Ã¢â¬ÅAha!Ã¢â¬Â



Collectively, the Major Banks in South Africa extort about R25 Million Per Day
with Hidden, Obscure and Hide & Seek Bank Charges.

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## Dave A

I'm going to be pretty interested in the final report of the banking competition inquiry. I saw one of the folks from the inquiry (forget his name right now) on SABC2 the other day and about the only comment that really stood out was "It's complicated."

Yeah - I was _so_ surprised. After all, obfuscation _is_ one of the tools of concealment.

The good news is we're not likely to see one of the major banks collapse any time soon. The bad news - What regulatory changes would really improve the situation? Savvy financial types are the least likely folks to cut their own throats by going to war on the pricing of services front. 

What is needed is real competition - and how do you regulate new service providors of the weight needed into the equation and still weave in all the political priorities that this government wants into any new sizeable venture?

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## Graeme

Oh I don't think we can ever win; not for so long as the Govt. keeps making non-economic socialist demands that the banks help the "homeless".  We can only shrug our shoulders, concede that we are on an adversarial relationship with them, and regard them always with the deepest suspicion.  Fortunately, greedy, chiselling banks make wonderful copy for journalists; something for which we should be very grateful.

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## Dave A

Well, the report is finally out. Judging from share price reactions, it wasn't too bad for the banks. Probably the most interesting recommendation is a cap of R5.00 in bank charges for unmet debit orders.

I found this snippet enlightening, though.



> It was apparent that the "legacy of discriminatory laws and practices of the past remains a challenge for the South African banking sector", said the panel.
> 
> "The South African banking landscape continues to reflect the fact that the majority of South Africans only enjoy limited access to banking facilities, with poor communities being neglected."
> 
> As an example, the panel cited the disparity in service provided to different communities: wealthy Sandton had 59 bank branches servicing 130 000 people, compared with one formal bank branch serving 175 000 people in predominantly poor Alexandra.
> full report from Business Report here


You have to wonder about the level of business acumen that might be lurking in the panel. 

How do you pay for the expenses of having a bank branch?

Does the amount of fees and interest earned relate to the number of people in the area, or the amount of money flowing through the accounts?

And then the panel *also* wants the banks to adopt a direct cost related fee model? What's wrong with this picture?

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## IanF

Dave
The one recommendation I heard about on the radio was to make it easier to cancel debit orders by just phoning. The abuse I have seen with debit orders is incredible. I even reported a company to my bank as they agreed to not debit me i still went and put a stop payment on it. Then it came through under a different name so I got the bank to reverse it. A year later they phoned me and asked for proof that I cancelled. 
 :Rant1:  I swore at the person and told them to go away in short movements. Companies like that should not be able to use the facility.  :Boxing:

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## Blurock

Hi Greame, 
I believe our money market funds are pretty safe due to our status as near banana republic and exclusion from world sub prime markets. Things may have changed since, but I do not think there is reason for concern.

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## murdock

i applied for a small increase on my overdraft...knowing thw bank would give it to me...because i reduced it a year or back to a manageble amount...and just as i expected the interest rate was the key factor..they increased it by 2 % not just for the addition but the whole amount so now if i go R100 into my overdraft i pay 20 % where as i was only paying 18 % last week...they have me by the balls until i complete 2 projects then they i should be in a position to remove my entire facility this time....

something else which really burns my butt...i confront the bussiness bank manager about my charges....so the reply is why dont you get a bussiness credit card then you dont get charged all the little fees...just R100 per year for a cervice fee...so my next question....why didnt you tel me about this 5 years ago i could have saved thousands....the response...you never asked...standard bank motto...we will scr*w you until you ask...dont expect us to advise you on ways to save money we are here to make money...and bring your million from the lotto we will loose it for you as fast as you won it....eeeeeish

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## BryanCasson

I went to print by end of tax year bank statements at R5.20 per page.... would you believe that they made me pay for 24 pages of spam that they attach to the last page of each monthly statement. That is an extra R124 out of my pocket for their spam. When I told them that I don't need the back page printed they told me I had to take it as it was part of the statement. I told them that I asked for only the statement and not the spam... again they told me.... tough luck!

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## Dave A

Which bank, Bryan?

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## BryanCasson

FNB

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## Dave A

Hectic!

Mind you, with their cheap transaction fees, I guess there had to be a catch somewhere.

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## IanF

Bryan
You can download the bank statements as a CSV file, I do that for our running club and then use that as a basis for an excel worksheet. It looks like you can go back quite far.  I am still quite impressed with the power of their internet banking.

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## Justloadit

Hy Bryan,

Do you have internet banking, free statements up to 3 months, or was it that you requested statements that were more than 3 months back?

Standard bank does the same thing for older statements.

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## Perform Computers

Yes but companies do not accept bank statements that are printed via internet banking. Must have the bank's stamp on it. Much cheaper to print it yourself & get it stamped, than pay those astronomically high bank charges for THEM to print it for you.

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## wynn

FNB also offer an accounting package with internet banking, simple but who knows?

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## BryanCasson

I needed a years worth of statements and they were not accepting online statements or self printed statements... only bank stamped statements

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## Dave A

Doesn't FNB send printed statements every month though?  :Confused: 

I can (almost) understand misplacing a statement and having to go back to the bank for a copy, but a whole year's worth?
Ouch!

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## wynn

Here is a copy of an email I recieved from FNB

 "Instant Accounting from FNB is an easy-to-use, integrated, online accounting solution that uses your FNB electronic bank statement to automatically do your bookkeeping. With Instant Accounting you can, with minimal input, do your books accurately and in record time. Instant Accounting generates various financial statements and reports, including income statements, balance sheets, cash-flow statements and more! Because the system is semi-automated, Instant Accounting reduces manual data capturing and processing which enables you to produce updated financials in a very short period of time."

 So what do you think? :Big Grin:

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## IanF

Wynn
Brilliant move by FNB. Just it makes it harder to leave FNB if you want to, you can get programmes which have the same functionality. Also where the data is stored and who can access it would worry me. So it is not for me.

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## Dave A

The last person I'd want having easy and detailed access to my live financial management accounts is my bank, particularly when it's raining.

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## AndyD

Yeah, good point, it does make you wonder about how much info they allow themselves to harvest and what use they can put it to under the terms and conditions small print.

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## Justloadit

> Yeah, good point, it does make you wonder about how much info they allow themselves to harvest and what use they can put it to under the terms and conditions small print.


You can not prove anything, if the manager looks immediately at your books and decides you are not worthy of a loan, what recourse do you have? 

Currently to maintain an overdraft, you have to supply your financial s, mine are always about 18 months behind time.

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## Neville Bailey

> ... you can get programmes which have the same functionality...


Pastel has an add-on module called Bank Manager, which imports bank statements (which you would have downloaded from your banking website) into your cashbook.

You can then "train" the module to automatically allocate recurring payments and receipts to the appropriate ledger accounts in Pastel, thereby reducing your data capture workload and eliminate the risk of human error.

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## wynn

I agree with IanF.

Sage advice is that one should keep a second account at another institution alive just in case their is a problem with bankA.

If bankA becomes a problem, for whatever reason, move your business to bankB and open a new account at bankC.

Having two accounts at one bank offers no security, they just suck whatever funds they need form any account you have with them unless of course you have a payment they can bounce.

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