South Africans have access to a wide range of banking services. There are numerous account options available from a variety of banks that offer competitive interest rates on positive accounts. Despite the fact that over 23.5 % of South Africans are unbanked, we have a banking industry that provides bank accounts for children, teens, adults, professionals, and various types of businesses.
Not having a bank account can have an impact on how you earn money. Bank accounts have the lowest transaction fees when compared to other methods of payment. Mukuru, for example, charges R15.00 for every R100.00 transferred which is a very high cost to pay when transferring money. Money market transfers also have high fees, which can reach 10% of the amount transferred.
A new banking disruption has arrived, but it is still in its infancy. Decentralized finance, also known as DeFi, will enable many unbanked South Africans to bank for the first time while paying low fees. However, traditional banks are still popular and they seem to be doing well.
Banking in South Africa is simple, but the industry is highly regulated, so you must have the necessary paperwork. Furthermore, selecting the best bank for you is an important consideration. How does one start banking in South Africa? This is a very important question, let us now answer this question below.
How to start banking in South Africa
Why do you want to open a bank account? This is the question you must answer before opening a bank account. By answering this question, you will be able to determine which banking system is best for you and which account to open.
We bank for a variety of reasons. Some of us, bank to save, hold cash, conduct transactions, and invest. South Africans have access to a variety of banking institutions. Those who want to bank can do so through traditional, neobanks, or online banks.
These types of banks are explained below to help you get started with banking.
1. Traditional Banks
Traditional banks have a physical presence and branches throughout the country. These banks also run their own branded ATMs, which are located throughout the country. These banks are well-known in South Africa, and the vast majority of South Africans have an account or more with one of them.
When compared to their competitors, traditional banks provide a broader range of services. Among the services available are, but are not limited to:
- Credit cards.
- Deposit accounts.
- Wealth management.
- Asset management.
- Broker services.
- Advisory services.
Traditional banks include South Africa’s big five banks (FNB, Absa, Standard Bank, Nedbank, and Capitec Bank). These banks are appropriate for those who want to bank online while also receiving face-to-face customer service.
2. Online-only Banks
Online banks emerged during the dot-com boom, influencing the way we bank and pressuring traditional banks to adopt internet banking services. As the name implies, these banks only operate online. There are no branches to visit because there are no local branches for these types of banks.
Online-only banks are less expensive than traditional banks to maintain. These low prices come with no face-to-face communication. PayPal and Google Wallet are two examples of online-only banks.
Neobanks were founded during the 2008 financial crisis, and the name was coined in 2016. These banks are becoming increasingly popular and have been steadily growing since their inception.
NeoBanks are fintech companies that provide apps, software, and other technologies to help with mobile and online banking. Unlike online-only banks and traditional banks, Neobanks specialize in a specific product, such as checking and savings accounts.
Their business model is straightforward, which is assisting the unbanked in opening their first bank accounts and receiving banking services like those that banks with traditional banks receive. TymeBank is a good example of a NeoBank, which was founded in 2015 to assist unbanked South Africans in getting started with banking.
Choosing a banking product
You now have a better understanding of the various types of banks available to you. You can now search the bank’s catalog for the bank account that you want to open or a service that you want to apply for. Banks provide the following services:
Traditional banks offer these products; however, Neobanks and online-only banks have some limitations. Because they are relatively new, some Neobanks and online-only banks do not provide credit.
When selecting a banking product, compare the fees and interest rates charged by different banks. For example, if you want to open a 5-year fixed deposit account, look for the account with the highest interest rate for the time period.
Giving out your information
When applying for any banking product, traditional banks require some paperwork. You can start banking with Neobanks and online-only banks without submitting any documents. You can open a bank account with NeoBank by simply providing your ID number.
If you intend to use a traditional bank, make sure your information and documents are in order. When opening a traditional bank account, you must provide the following documents:
- Copy of ID or passport,
- The latest proof of income not older than 3 months at the time of application,
- The latest proof of address that is not older than 3 months at the time of application,
- Recent proof of income or payslip, and
- Bank a 3 months bank statement.
Banking is available to anyone in South Africa, from children to adults; however, young children must be accompanied by a guardian when banking. There is no reason not to start banking in South Africa; whether you prefer traditional or modern banking methods, there is always a bank that can accommodate you.
Those who are visiting but do not have a permit can open a bank account. Non-resident accounts are available for people who do not have a permit to live in South Africa. Although a non-resident account does not provide the same banking benefits as a regular banking account, it is still a good way to begin banking in South Africa if you are from another country.