Walking through the streets of South Africa however is a different story and it’s not uncommon to see queues forming outside of local branches as people wait to speak to the bank clerk for their everyday banking needs.
I was lucky enough to recently spend several days in Cape Town and Johannesburg visiting Investec Private Bank’s head offices, observing how the South African market differs from our own.
Limited competition
With only six prominent mortgage lenders in South Africa (Investec, Standard Bank, FNB, Absa, NED Bank and Capitec) competition on the face seems limited.
These lenders rely heavily on a branch network, as would any new entrants. This is not due to financial institutions being behind the times with their digital offerings, rather more to do with the vast demographic of residents they need to serve.
As many people are aware, there is considerable wealth in the country but also extreme poverty, the abundance of shanty towns is a stark reminder of this.
It is perhaps not surprising that with only a few lenders to speak of, mortgage brokers are also few and far between. By default, most borrowers looking for a mortgage, or bond as it is known locally, go to their bank or shop the market themselves.
So of course, my first question on meeting a mortgage broker was; “with only six lenders, what can you offer clients?” he turned around and said “there may only be six but I know them all and can expedite the process for borrowers.”
The market is not as tightly regulated as here in the UK and there is no requirement for advice. The introduction of the National Credit Act in 2007 has led to stricter affordability measures and this in turn has aided the popularity of brokers, but nevertheless, the country does not benefit from an intermediary sector like our own.
For brokers in South Africa it’s vital they form a good relationship with estate agents. I was surprised to learn a binding offer to purchase a property can be made by a prospective buyer on the spot through a simple handshake with an estate agent.
Fourth emergency service
In a country with emergency and public services that aren’t quite as advanced as ours, the role of a private banker is much more than that of financial advice.
Imagine that a client is out playing golf and unexpectedly suffers a heart attack – you might think the first person his colleagues would telephone would be an ambulance, but no. In many cases it is the client’s private banker who will arrange for an ambulance and any other requirements to be sent to the scene.
In the same way a client who has just been burgled might make their private banker their first number dialled.
The driving factor in both examples being the client knowing all of their needs will be addressed by one call.
The relationship private bankers build with their clients in South Africa is often very different to the typical relationship some would have in the UK.
The banker has a deep and personal knowledge of their client’s family, finances and business operations.
Often considered as an extended member of the family in many ways. The relationship is built over many years and the banker becomes trusted confidente so, in unusual circumstances, such as a burglary, the first call is to the banker who will be able to help whatever the situation.
Fortunately, I had no need for the emergency services whilst over there. Indeed, I found it an extremely hospitable and safe country to travel in.
In my next article I shall discuss the difference between the country’s mortgage products and our own.
