South Africa's newest digital bank, Bank Zero, has finally launched to the public after numerous delayed public launches.
While the digital-only bank has Johannesburg-based offices, it claims to be a pioneer in being the “world’s first” fully fledged bank to start live operations with all staff members working remotely, as a safety measure due to the COVID-19 pandemic.
The newcomer to the South African digital-only banking market was first announced in 2018, after its co-founders, former First National Bank (FNB) executives Michael Jordaan and Yatin Narsai, were granted a mutual banking licence by the South African Reserve Bank.
The app-driven bank, which offers customers zero fees for several services, started its alpha testing phase among staff members in October 2018, followed by its beta testing phase in 2019 when it launched its card go-live and ran retailer readiness among a small group of citizens.
Bank Zero was initially scheduled to launch in 2019, but this date was postponed to the following year as it continued with the rigorous testing phase. In 2020, its public operations once again hit a snag as a result of the unprecedented disruptions caused by the COVD-19 pandemic, which forced the bank to run a “closed roll-out” of its services and push out the launch to a later date.
Narsai, CEO of Bank Zero and former FNB head of retail, told ITWeb the testing phase has since performed well over 10 000 transactions across the bank’s six business and individual banking payment rails.
“It’s been an incredible journey and we're excited to bring our solution to our country when it needs it most – there's lots of urgency now,” says Narsai.
“We’ve had to first transition to public operations, which unfortunately was interrupted by the pandemic and the recent violence. This caused delays, but our value proposition was retained. We are now ready with a value proposition made for a pandemic world with everything digital – no branches, call centres, paper – customers only need our app and e-mail.”
Bank Zero launches with a team of about 30 staff members, he adds.
It is co-founded by seven investors, including former FNB CEO Jordaan, who is chairman of the bank.
The five other unnamed investors are actively involved in daily operational management of the bank, without earning salaries.
“Our core team remains against all odds. It was never in our script to be thrown into a pandemic wilderness followed by violent upheaval in our country. We’re now focusing on increasing customer numbers quickly. Staff numbers have grown in eagerness to ensure we can service a solution that both businesses and individuals need in these trying times,” adds Narsai.
Fresh, unique approach to banking
Described as “a unique and fresh approach to banking”, Bank Zero says it does not have entry-level accounts, but offers a "segment-agnostic" approach, which provides individual and business customers with access to all features, such as low banking fees, free rogue debit order protection and seamless integration with Xero accounting software for business clients.
Its patented card technology ensures the 16-digit card number no longer needs to change each time a card is replaced, meaning card details for digital services (such as Netflix or Uber) don't have to be reset.
In October, it revealed its pricing guide, which is expected to trigger an intense price war among local financial institutions. The bank bills itself as the first bank in SA to charge zero fees for EFT payments. It also offers free debit order services and there is no charge for payments made to other Bank Zero customers.
Once customers have downloaded the app, the biometrics-enabled registration process takes a few minutes and customers are required to submit their FICA documents.
Following the registration, two card delivery options are offered: collection at a Pargo Pickup Point at Clicks Pharmacy (for R79) or to have it delivered directly to the customer (via DSV couriers from R139, depending on distance).
Customers can use any ATM – both locally and internationally – to access cash with their Bank Zero debit card, as well as make use of the typical cash-out facilities at major local retailers.
Explaining how it is possible for Bank Zero to be a low-cost bank, the bank attributes this to its cost-efficient mutual banking structure and lower capital requirements.
“We strongly believe in making banking accessible and affordable to all – both businesses and individuals – as this has a positive impact on the economy. Our customer operations area uses advanced cloud-based services that are integrated to our local services to ensure customers can easily reach us (via e-mail) and get queries quickly resolved.”
Shaking up SA’s banking sector
The local retail banking industry is set for continued shake-up as SA sees the rise of digital banks.
TymeBank, which bills itself as SA's first digital-only bank, controlled by billionaire Patrice Motsepe's African Rainbow Capital, launched to the South African public in 2018.
During the same time, insurer Discovery unveiled what it describes as the “world's first behavioural bank”, starting its Discovery Bank operations from March 2019. The bank has said anyone with a smartphone can join.
TymeBank's pricing structure is based on a two, four, eight model: R2 for withdrawals (at all major retailers), R4 for cash deposits (at Pick n Pay and Boxer Stores), and R8 for ATM withdrawals (at any ATM).
Discovery Bank, which has reached over 300 000 clients, offers one fee for all transactions. It charges a monthly account fee of R10 and pay-as-you-go transaction fees based on the customer’s behaviour.
Earlier this year, TymeBank, which has over three million customers, announced plans to explore international opportunities after securing R1.6 billion in funding from investors in the UK and Philippines.
Commenting on the intensifying competition in SA’s digital banking space in an earlier interview with ITWeb, Arthur Goldstuck, head of World Wide Worx and chairman of Sasfin Bank’s Digital Advisory Council, said the increasing competition is healthy for the financial services sector and is also good for local consumers.
“Bank Zero clearly wants to get the platform working smoothly before it goes live. It has the greatest potential for total digital banking, as it is built on the principle of removing all manual intervention.
“In any market, at any time, there is room for new competition. If one ever said there was no room for more competition, regardless of the product or sector, it would be like calling a halt to all innovation and entrepreneurship,” noted Goldstuck.