Cheapest, costliest bank accounts revealed in survey

It now costs Sh17,750 to maintain Kenya’s most expensive bank account annually, a survey has revealed, pointing to the steep cost of financial services in the country.

The report, which is the product of a two-year survey of the banking market by Financial Sector Deepening (FSD) Kenya, indicates that Standard Chartered Bank’s “all in one account” is the most expensive to maintain.

It charges customers Sh17,750 annually -- marking a 31 percent jump in the cost that customers paid previously.

The cost of running a bank account encompasses withdrawals, deposits, transfers and paying for account maintenance charges like ledger fees and balance enquiries.

The survey lists Barclays “ultimate account” as the second most expensive to maintain at Sh14,558, followed by NIC Bank’s “move pay as you go” (Sh13,393) and Stanbic’s “smart” (Sh12,312) and “silver pay as you go” accounts (Sh11,676).

Diamond Trust Bank’s current account was the cheapest, costing clients only Sh845 a year. It is the only lender that charged less than Sh1,000 annually to operate an account, according to the report.

“Accounts that charge a monthly ledger fee have higher annual costs. However, the line between pay-as-you-go accounts and flat fee accounts is blurred as some pay-as-you-go accounts charge a monthly ledger fee. Likewise, some flat fee accounts also charge per-transaction fees such as withdrawal and transfer fees,” says FSD in its annual report for 2018.

The survey sampled the charges levied on a total of 22 different current and salary accounts in each bank. The 2018 cost of banking study focused on deposit accounts offered by 11 banks that cumulatively controlled 97 percent of the total number of deposit accounts in Kenya as at December 2017.

The FSD team posed as small-business owners with a gross monthly income of Sh30,000 and a salaried employee with a net monthly salary of Sh20,000 and operated in 11 Kenyan banks. The customers then opened the 22 recommended accounts and maintained them for a period of four months from June 2018 to October 2018. During this period, they ran several transactions on the accounts and the costs were presented in the account statements.

The survey revealed that the cost of running an account was diverse across banks, averaging Sh4,419, and ranging from Sh845 to Sh17,750 annually.

“The largest component of annual operating costs are withdrawal and transfer costs with the latter having huge variations between the observed minimum and maximum costs,” FSD said.

And in what may explain the growing preference for digital banking products, the survey found that a bank customer who transacts digitally saves an average of Sh9,350 in annual transaction costs.

“A customer who prefers to transact at the branch will incur an average of Sh14,970 in annual transaction costs compared to Sh5,620 if transacting digitally. However, a lot of costs are stacked on digital transactions such as the cost of an SMS receipt which was as high as Sh28 for one bank,” FSD said.

The survey shows that the costs of some digital transactions remain higher than at the branch. Transactions such as account balance enquiries are free at the branch, but are charged by some banks when the inquiry is over a mobile banking app. Additionally, there are several other charges associated with digital transactions that stack up the costs, such as charging for SMS receipts and access fee for internet banking.

The study shows that the decision by the government to double excise duty on fees charged by banks from 10 to 20 percent in 2018 had caused distortions in the Over-The-Counter (OTC) withdrawal charges by lenders. Across most transactions, the increase in costs was commensurate with the increase in tax except for OTC withdrawals where the average costs went up by upwards of 50 percent. Banks used this to drive up the cost of withdrawing cash over the counter by up to 50 percent.

“The most significant difference is in the cost of withdrawals at the branch that increased significantly more than the tax,” the study states.

When opening an account, customers were either forced to deposit a minimum opening balance or were told to pay for an ATM card or a ledger fee that was deducted at the end of the first month.

Across all the banks, transfers done over PesaLink were the cheapest with a customer spending an average of Sh57 per transaction, while Real-Time Gross Settlement (RTGS) transfers were the most expensive, averaging Sh593 per transaction.

The RTGS system is owned and operated by the Central Bank, which charges participating banks an annual subscription fee based on the volumes of a bank’s RTGS transactions.

A certified bank statement averaged Sh462 with a maximum of Sh1,272 per statement. Some banks levy the fee per page while others charge a standard amount irrespective of the number of pages.