Sophisticated banking system essential for SA: Absa
December 1, 2006
Johannesburg – Absa on Thursday told the Competition Commission of Enquiry into Banking and the National Payments System that South Africa cannot afford the cost of having a less sophisticated banking system.
In his presentation to the Commission, Absa Group chief executive Steve Booysen said that Absa welcomed the enquiry not only for what it might do to explain banking to the public, but also because its timing is good for Absa.
He said the timing was good for the bank "because we have been engaged in a thorough review of our business practices since the acquisition by Barclays of a majority stake in Absa”.
He added that Absa's new management team, which he said been in charge of the banking group for the past two years, “believes that the role of banks should in any case change in response to a rapidly evolving, new environment”.
Booysen said that banks were traditionally narrowly focused on transactions, credit, risk and price.
"But Absa is moving to a value proposition that focuses on the value that is added to customers, to our staff, our shareholders and the wider society in which we operate."
Booysen said that over the last twelve years many new competitors, including Absa, have entered the financial sector market and that new competitors still appear regularly. "A significant portion of the new competition is focused on providing services to lower income consumers."
He said that in response to the competitive nature of the financial sector in South Africa and the fast pace of change in the environment in which the industry operates, Absa is evolving its role for the future.
"Absa used to focus on being a traditional provider of credit, transactions and investment by managing risk. Today, Absa is becoming a meaningful enabler of personal capital formation amongst all South Africans."
He explained that personal capital formation is the accumulation of capital by ordinary individuals and families through savings and investments and that Absa believes homeownership is at the heart of encouraging personal capital formation.
Louis von Zeuner, Absa Group executive director, told the panel that South Africa has a world-class financial sector that serves as a key enabler for the economy and it is also an essential part of the daily lives of millions of ordinary South Africans who use the financial system to conduct a wide spectrum of transactions.
"Millions of financial transactions, small and large, ensure that grandmothers in the rural areas receive the funds transferred to them by their grandchildren in the city. The same system also enables the seamless exchange of billions of rands for major deals on the JSE," von Zeuner said.
Von Zeuner said the market is currently experiencing an actively changing regulatory environment:
"It would therefore be advisable to consider the impact of these changes before introducing further regulatory intervention."
Absa also explained that competition drives innovation, performance and access. "Competition between the various players in the market becomes quite noticeable when one considers the impact of competition on innovation, performance and access," said von Zeuner.
First National Bank (FNB) in its presentation to the Enquiry earlier this month suggested that banks should agree to reduce SASwitch fees. But von Zeuner said that it is unclear what they meant, because if they meant fees to customers, it is a commercial issue for banks to individually decide.
FNB can therefore do this if it wants. "If they meant scrapping interchange fees we are bemused since we have already made that proposal to them in April this year but FNB did not respond favourably. Absa's position is that we favour lower charges to ATM customers." - I-Net Bridge
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