The end to Bank Codes in South Africa

The rumours of bank codes becoming non-existent has settled into a reality. This has been an ongoing discussion amongst banks within South Africa over the last few years. The first two banks to implement the extinction of bank codes were Investec and Citi Bank as they publicly notified businesses of their decision in October 2019.

Shortly after this came into effect, Standard bank had announced that they too were going to end the supply of bank codes from the 1st November 2019. This was a concerning component for businesses as it would impact the way in which credit assessment decisions would be made when trading with new and existing customers. At the time, these were the only banks that had initiated the end to bank codes, but there were rumours that other big South African banks were considering following a similar suit.

In April 2021, First National Bank made a public announcement that on the 1st of July 2021, they will no longer supply bank codes.

In Southern Africa, bank codes have been commonly used over decades, yet it’s a unique style of operation in comparison to international banks, whom do not provide bank codes. South African Credit Bureaus as well as Trade Credit Insurers require banks codes as part of their underwriting criteria and credit assessments. Bank codes therefore, influence the decisions of Trade Credit Insurers and Credit Bureau’s in assessing customers affordability in the absence of financial statements.

Whilst the importance of codes has been questioned by credit grantors, the reality is that bank codes have been instrumental towards assessing credit transactions. This became even more vital when negative codes were supplied. Stats have shown that 80% of bank codes granted were “C” rated codes, however on the contrary 3.5% of codes obtained reflected negatively (Codes D, G & H), which may carry more weight when trying to mitigate risk.

In the absence of bank codes, institutions will place more focus on - elements to assess credit worthiness such as; bank statements, financial statements, searching for adverse information, extensive reference checks, payment trends and in some instances conducting debtor visits.

Debtsource assesses credit worthiness through various components, of which bank codes are one, but Debtsource never relies solely on bank codes. We also confirm that we are well- equipped with additional resources and expertise to provide effective credit assessments without the presence of bank codes.

Our on-going firmness towards receiving and implementing effective documentation, supplier payment trends, debtor visits, assessments on financial statements and continuous alerts on adverse information, places our solutions as an ideal competitive advantage for our client base in granting accurate credit assessments. Our intention is to help clients trade safely while maximizing revenue.

Source: Debtsource