Part 2: Banking on Small Businesses in South Africa

71point4 > Blog archive > 2021 > November > 02 > Part 2: Banking on Small Businesses in South Africa
71point4 > Blog archive > 2021 > November > 02 > Part 2: Banking on Small Businesses in South Africa

Part 2: Banking on Small Businesses in South Africa

Posted by: Jessica Robey
Category: Credit, Financial services, Social initiatives
Part 2 in our series of blogs on 'Cashless Khayelitsha'.

As part of the Cashless Khayelitsha pilot action-research project, we deployed mobile point of sale (MPOS) devices in the small township-based businesses we are working with.

Large banks require business owners to have a business bank account in order to enroll for a device. This prompted us to look at the general pricing structures and offerings of the different business bank accounts, focusing on those targeting small business owners.

We found complicated pricing structures, high transaction costs, and little evidence of banks incentivising small business owners to move away from cash. While all the accounts we investigated were advertised as ‘affordable’ and tailored to the needs of small business owners, few catered to the needs of the township-based businesses we are working with.

The good news is that new digital banks are a significant improvement. In addition, non-bank service providers including market leader Yoco and iKhokha do not require their clients to have a business bank account. Businesses can instantly start receiving the benefits of digitising their customer payments without the extra hassle and cost of opening a separate business account. Because of this, we only deploy these two solutions in the Cashless Khayelitsha project.

Nevertheless, we think it is useful to share what we found, in the hope that it prompts more competition and innovation in the provision of digital banking and payment solutions for small businesses.

In this blog series, we explore pricing of key bank account services and access to channels from the perspective of Amos* (not his real name), a business owner located in Makhaza, Khayelitsha. The specific products we explore are:

  • TymeBank’s Everyday business bank account
  • Bank Zero’s business account
  • Standard Bank’s MyMoBiz account
  • Capitec’s Mercantile business current account
  • FNB’s First business zero account
  • ABSA’s Evolve Zero account
  • Nedbank’s Start Up Bundle account

Amos owns a small restaurant in Makhaza Khayelitsha which he opened during lockdown. In a typical month his business revenue is around R45 000, some of which he now receives digitally. Which bank account offers him the best deal? This is a surprisingly difficult question to answer. Fee structures are so complicated that most banks have a ‘compare’ function on their websites to enable prospective clients to assess costs associated with the different business account offerings. Unfortunately, they don’t include all services and associated costs. Business owners are therefore well advised to conduct a careful analysis of the detailed pricing guide to make the most efficient choice, which may well be to forgo the privilege of having a business bank account altogether.

To explore this topic further, we have written two blogs looking at Who is banking on the small township business owners? and Where should Amos bank? 

Authors: Illana Melzer, Jessica Robey, Frances Whitehead

Like our blogs? Subscribe to receive email updates when new blogs are published.

Author: Jessica Robey

Leave a Reply