Home affairs minister Leon Schreiber has described TymeBank’s urgent plea for him to reverse his price increase for online identity verification against the national population register (NPR) as an expression of vested interest.
The minister has slammed the “shameless profiteering” that has taken place on the back of the department of home affairs’ low prices.
In an open letter, TymeBank co-founder and CEO Coenraad Jonker said the 6,500% increase from R0.15 to R10 would threaten financial inclusion, digital transformation and the business model of his fully digital, fee free bank.
On Monday Schreiber gazetted the price increase for consulting its NPR that will come into effect on July 1. The aim of the increase is to finance substantial upgrades to the service.
The new pricing structure for single, real-time verifications during peak hours will be R10 per transaction and an off-peak tariff for nonlive batch verifications will be R1 per verification field request.
It is the first tariff increase since the online verification service (OVS) was introduced in 2013.
Schreiber said in a statement on Monday that the underinvestment in the NPR caused by “staggering underpricing” meant that more than half of verification attempts failed.
“For more than a decade, banks and financial service providers have only paid R0.15 for real-time verifications against the NPR. This is below market-related rates charged by the private sector for comparable services and far below the cost to the state of providing the OVS, which deprived home affairs of the resources required to maintain the NPR.
“Extreme underpricing has led to profiteering and abuses by some users that overwhelm the NPR and cause failure rates in excess of 50%, contributing to ‘system offline’ failures at home affairs offices and threatening national security.”
He said on X that various stakeholders from banks and financial service companies to Cosatu had recognised the urgent need to fix the NPR.
In his open letter Jonker proposed a consultative process with all key stakeholders, including the fintech and retail industries, a phased fee structure, volume-based pricing, a cost recovery model linked to performance and inflation and reasonable notice periods that allow institutions to plan and budget.
Jonker said TymeBank, a fully digital bank, served 11-million people, many of whom were social grant recipients and informal earners. Under the current fee structure, the bank was able to provide the poorest South Africans with an account in real-time with no monthly fees. The new fee would make this impossible.
“Your decision shifts the cost of what should be a state-funded utility onto the shoulders of the poor. It imposes a regressive tax that penalises those with the least,” Jonker said.
He noted that the department of home affairs price hike was “wildly out of line” with the average cost per user relative to SA’s peer group countries.
Jonker said the proposed, cheaper new batch-processing option was not a practical substitute for real-time data lookups.
Furthermore, access to the department’s identity verification services was vital for compliance with standards imposed by the Financial Action Task Force (FATF), which greylisted SA.
“How can banks and fintechs meet their legal obligations when the cost of compliance is prohibitively high? This decision forces institutions towards unverified data source in a bid to survive, undermining the integrity of our financial system and opening the door to increased fraud and risk,” Jonker argued.
Schreiber said the current OVS system was not the “reliable” one that Jonker needs. “If perfect real-time verification is so key, how have they done it this long with a system that doesn’t work half the time? The new cheaper off-peak option is completely viable.”
Cosatu parliamentary co-ordinator Matthew Parks welcomed the price increase saying the low price was a de facto subsidy for financial institutions and overloaded the department of home affairs’ system, which was often offline. Workers lost wages as they queued for days to apply for documents.
“This additional revenue collected from financial institutions will provide badly needed funds enabling the department to fill critical front-line vacancies and to maintain and modernise its ageing infrastructure,” Parks said.
He said Cosatu would work with other trade unions to ensure that the cost reflective tariffs were not used as an excuse by private sector institutions to increase banking and related fees charged to customers.
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