ATM Hearings with the Competition Commission

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ATM Hearings with the Competition Commission
April 2007
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Contents
Current ATM Model
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Explanation of Applicable Fees
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Zero SASWITCH Fee Model
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Direct Charge Model
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Cashback at Point of Sale
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Current ATM Model
4
Fees applicable to the Current ATM Model
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The Role of the Carriage Fee
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The Role of Banded Withdrawal Fees
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Alternative Model Drop SASWITCH Fees
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Pros Cons Drop SASWITCH Fees
Pros
Cons

• Reduced direct cost to consumers

• Challenges of setting the carriage fee remain

• Simplifies ATM pricing

• May reduce incentives for interoperability

• Encourages efficient utilisation of ATM networks
  by consumers

• May lessen price transparency

• More attractive ATM offering to consumers

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Alternative Model Direct Charging
The direct charge model will result in no
Saswitch premiums charged to the customer and no
carriage between banks The customer will pay a
fee determined by the ATM provider for each
transaction performed on their ATM
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Pros Cons Direct Charging Model
Cons
Pros

• New costs will be incurred by ATM providers

• No need to negotiate fees bilaterally

• Difficulty in predicting changes in customer
  behaviour and prices

• Direct price competition amongst acquirers

• Increased access to ATMs for consumers

• May require significant customer education

• Additional ATM functionality could be offered

• Commercial technical difficulties in rolling
  out direct charge model

• Greater transparency of pricing at point of
  transaction

• Operates in a number of countries

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Cashback at Point of Sale
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Overview of Cashback at Point of Sale
Transactions

• Transaction performed using a debit card at a
  Point of Sale device at various retailers

• For FNB, cashback at POS carriage fees flow from
  issuer to acquirer as with ATMs

• Uses existing POS infrastructure

• Fee arrangements negotiated between the acquiring
  bank and the merchant based on overall deal
  economics

• Rollout partly determined by retailers demand

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Summary

• The current ATM model is competitive

• Cannot look at transaction costs and revenues in
  isolation

• FRB has looked at alternatives to the current
  model

• Dropping SASWITCH reduces direct cash withdrawal
  fees to consumers

• Direct charging removes the need for carriage fees

While there are pros and cons to each model, the
objective is to improve the market overall
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Appendices
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Overview of Mzansi Accounts

• Mzansi joint initiative between banks under FSC
  guidelines offer cheap transactional banking to
  low income customers

• ATM and other transaction fees discounted

• No SASWITCH premium for off-us withdrawals

• Improve efficiency of ATMS in remote areas

• Reduce prices to Mzansi account holders

• Simple, flat fee structure which is easy to
  understand

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Overview of Mini-ATMs

• Deployed in rural areas with limited/no access to
  ATMs

• Mini-ATMs offer limited functionality

• Situated in retailers stores and utilise their
  cash holdings

• Lower transaction volumes than traditional ATMs

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Off-Us Customer Fees and Carriage Fees
Until bilaterals are in place
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Total Costs of Running FRB are Allocated to
Products where they are Recovered
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Not all Costs can be Directly Allocated to
Revenue Generating Transactions
Costs
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Costs are Allocated at Product Level
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Potential Short Term Impact on a Bank if SASWITCH
is Dropped