TymeBank slams Home Affairs for steep hike in cost of ID verification (up to 6 500%)
The Department of Home Affairs says the old price was far below the cost to the State of providing the online verification service.
FILE: Department of Home Affairs. Picture: Sethembiso Zulu/Eyewitness News
The Money Show's Stephen Grootes talks to Coenraad Jonker, founder of the Tyme Group and co-founder of TymeBank.
TymeBank co-founder Coenraad Jonker has slammed the Department of Home Affairs for steeply hiking the fee banks and financial services providers have to pay for verifying customers' identity.
The new prices amount to an increased cost of up to 6 500%.
In a statement, the Department noted it previously charged users 15 cents per real-time verification against the National Population Register (NPR), which has not changed since the launch of the service in 2013.
After initiating substantial upgrades to the service, it has gazetted a new price structure that sets a 'cost-reflective' price for real-time verifications during peak hours at R10, and an off-peak, low-cost alternative for batch transactions costing R1.
"The Minister of Home Affairs calls upon users to rise above narrow profiteering and put South Africa’s national security interests first."
Department of Home Affairs
However, Jonker says what the new fee structure actually does, is threaten the unit economics of their service to the poorest South Africans.
This means is that the price increase makes it unprofitable to serve a social grant recipient, he goes on.
"We absolutely agree with the Minister that the system has to be fixed and we've offered to help in whatever way we can to do this... but it cannot be done at the cost of the poorest South Africans and at the cost of financial inclusion and transformation in the country."
Coenraad Jonker, CEO - Tyme Group
TymeBank has worked for many years to make sure they run a business that is cost-efficient enough to profitably serve that customer, and the Minister's decision has far-reaching effects, Jonker says.
He spells out the consequences for TymeBank, or probably banks in general.
"There are two things that can happen - either we cross-subsidise this customer by using the money we make from other customers, but we know in the long run that doesn't work. Ultimately, shareholders are going to say you have to stop serving that customer... or we'll have to raise the prices and then the customer will no longer be able to afford the service."
Coenraad Jonker, CEO - Tyme Group
Jonker says the decision also takes South Africa 'way out of kilter' with what other emerging markets charge for the same service.
"It appears to us as a regressive tax. It is essentially the Minister charging ultimately the poorer South African customers to fix a system that the government should be providing as a utility for all citizens."
Coenraad Jonker, CEO - Tyme Group
To hear more from Jonker, listen to the interview audio at the top of the article