More bank customers use overdraft facilities


By Given Majola Time of article published 45m ago

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BANKS said they were seeing more customers seeking overdraft facilities as a cash flow management tool.

An overdraft is a loan facility that was usually offered as an extension to a cheque account, allowing banking customers to better manage their cash flow needs.

Magdeline Thidiela, Standard Bank Head of Client Solutions, Retail Personal Lending, said on Friday, that last year, the lender had initially seen a decrease in the demand for overdraft facilities as a result of the hard lockdown, temporary closure of some branches, and overall individual expenditure decreasing as customers stayed at home and tightened their wallets.

“However, as the restrictions started to ease, we did see an increase in demand for the offering. Overall, the demand for an overdraft product has remained consistent over the past three years,” said Thidiela.

The bank said it expected the demand for this facility to continue to grow going forward.

“Once granted, this serves as an emergency fund and there is no pressure for it to be used immediately. Cash can be withdrawn or payments can be made whenever it is required by the account holder and interest is only charged on the amount utilised in a given month. However, unlike other traditional personal loans, at the end of the month, the balance owed on the overdraft including interest due is deducted from the funds in the account.”

Warren Tromp, Nedbank Head for Product and Customer Value Management, said unsecured lending growth was a key growth vector and the overdraft offering formed a part of this credit and transactional growth strategy.

“Our overdraft credit product is a cash flow management tool, something that has become increasingly important to our clients over the past year. As such we have prioritised ensuring clients can easily access this product through a range of digital channels. This has resulted in a significant increase in our clients taking overdrafts,” said Tromp.

Yashen Singh, FNB Premium Core Banking chief executive explained that overdrafts were a good money management tool to assist in managing the timing of a customers’ income and expenses.

“Should a customer’s expenses arrive earlier in the month than expected , such as a debit order, the facility helped as a buffer till their salary is deposited into their account,” he said

Singh said it was also important in ensuring that there was then no interruption in services for the customer, for example, in a cellphone bill and also protecting the customer’s credit record.

Capitec said that while it did not have an overdraft facility, their Access Facility could be used in much the same way and offered increased flexibility.

African Bank said it was currently working on launching an overdraft facility as it currently did not have one.

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