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Bank Zero increasingly gains ‘primary bank account’ status

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 23 Jan 2024
Bank Zero will soon provide the “pay many” service for businesses.
Bank Zero will soon provide the “pay many” service for businesses.

Bank Zero has seen strong growth in consumer and business customers signing up for the digital bank, and it plans to introduce several payment offerings, including international electronic fund transfer (EFT).

The branchless bank, which received its licence one year after competitors TymeBank and Discovery Bank, launched to the public in August 2021. It is co-founded by seven investors, including former First National Bank CEO Michael Jordaan and banking innovator Yatin Narsai.

Bank Zero says its business model, based on the “segment-agnostic” approach of not offering entry-level accounts and “zero banking fees”, has seen it garner an increasing number of customers since inception.

In an e-mail interview, CEO Narsai tells ITWeb the neobank has seen a huge appetite for its services among South Africans, with customer growth up 75% year-on-year between 31 December 2022 and 31 December 2023.

“Bank Zero is the youngest of the three ‘challenger’ banks. We’re still small, but growing very fast, with bank accounts growing at 115%,” notes Narsai.

“Business customer growth is even faster than individual customer growth. Customer growth in general is strong, and yet it is positively outstripped by the growth in card turnover and accounts – a sign of strong customer quality, and that customers are increasingly starting to view Bank Zero as their primary bank account, moving everything away from their other bank.”

Yatin Narsai, CEO of Bank Zero.
Yatin Narsai, CEO of Bank Zero.

The newcomer to the South African digital-only banking market was first announced in 2018, shortly after competitor TymeBank started to trial its digital banking app.

During the same time, insurer Discovery unveiled what it describes as the “world's first behavioural bank”, shaking up the industry when it officially started its Discovery Bank operations in March 2019.

Despite growing competition in SA’s digital-only banking market, Narsai points out South Africans are increasingly recognising the convenience, efficiency and low fees offered by new digital players, in comparison to traditional incumbents.

This trend is resulting in more consumers ditching their traditional financial institutions in favour of new, agile players, he adds.

“Many customers have told us about how they’ve been at a traditional bank for 30 years, and are now moving away to Bank Zero.

“There’s the efficiency and convenience benefit,” he states, with traditional banking customers still having to go into a branch to pair their new phone to a banking app, or reset their app PIN, or open/close an account, or re-FICA. "Customers are also starting to realise this is one of the big cost drivers for banks.”

Last week, TymeBank announced it had become profitable, reaching 8.5 million customers. Discovery Bank has said it expects to break even in the 2024 financial year. Its total clients exceeded 700 000 at the end of June 2023.

Narsai believes Bank Zero has a larger number of businesses opening accounts due partly to the zero/low fees for commercial customers, which he claims no other bank in SA is offering to businesses.

He notes that other contributing factors include the bank’s functionality, which allows, for example, transparency of informative notifications to all business owners, making it difficult for a business owner to be defrauded, and the ability to change authorisation mandates in a few minutes.

As part of an ongoing refinement of features and additional options, Bank Zero is looking to introduce ‘pay many’ functionality, immediate payments, international EFTs and phone tap payments.

While Bank Zero cards can already be used internationally, cross-border EFTs are not yet possible and “that will be one of the next big things on the cards in the near future,” according to Narsai.

For the immediate future, the bank will soon provide the ‘pay many’ service, which allows multiple payments simultaneously. “Our business customers have asked that we add ‘pay many’ as an urgent priority, so they can easily pay wages, or their supplier list at month-end.”

Apart from a low fee structure, the bank says its business model is premised on the integration of high-security features, to protect against cyber fraud. These include free rogue debit order protection and patented card technology that ensures the 16-digit card number no longer needs to change each time a card is replaced.

“It is unlikely that any other bank in the world has had such a high growth rate and yet with zero losses to fraud. Bank Zero’s low-cost base means that pricing can be kept low,” concludes Narsai.