A year after officially going live, Bank Zero will maintain its “zero fee” regime for its services in 2023 − with chairperson, former FNB CEO Michael Jordaan, surprised by the uptake in the number of business banking customers.
However, the digital bank is not yet disclosing the number of customers it has onboarded to date.
Yesterday, Bank Zero released its pricing guide for 2023, saying: “The big question was whether Bank Zero would be able to keep their zero fees at zero.”
Yatin Narsai, CEO of the digital bank, says “all the zeros are indeed still zeros”. He adds that “our other low fees have either remained the same, or have been reduced even further. This is a beautiful inflation-beating story, at a time when living costs are increasing beyond what is palatable.”
The app-driven bank 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.
Described as “a unique and fresh approach to banking”, Bank Zero says it does not have entry-level accounts.
Instead, it offers a “segment-agnostic” approach, which provides individual and business customers with access to all services, such as zero fees for EFT payments and debit order services, and no charge for airtime purchases and payments made to other Bank Zero customers.
Rise of neo banks
Digital-only banks − or neo banks as they are also known − are increasingly becoming attractive in SA, due to their approach of delivering innovative solutions at scale without the frictional processes of traditional retail banks.
Over the past three years, SA’s retail banking industry has been revolutionised by the rise of digital-only banks, with the launch of TymeBank, Discovery Bank and Bank Zero.
In September, Be Mobile Africa became the latest digital bank to descend on the South African market to take on the incumbents.
Says Bank Zero in a statement: “Cash deposits are new, and were prioritised due to customer request. Customers can deposit at any PnP or Shoprite till-point. The fee is set by the retailer, and customers need to confirm this with the cashier before making the deposit. These deposits are immediately available in the account once card and PIN are confirmed.”
Michael Jordaan, Bank Zero chairperson, shares the following insight: “The current customer base of Bank Zero consists of a large percentage of first adopters, which reflects in our higher-than-expected account activity.
“Whereas the early adopters were expected, the large percentage of business banking customers joining Bank Zero was somewhat surprising. It clearly talks to the current gap in the market for business banking – both in terms of fees and solutions.”
In an e-mail interview with ITWeb, Lezanne Human, co-founder of Bank Zero, says: “Due to our low costs, our break-even is at approximately 100 000 customers. We’re not yet revealing our customer numbers, but we are seeing nice growth though – which is especially promising in this current economic climate.”
Describing how the bank will make profit with its zero pricing model, Human says: “Same as all banks, we get an interest margin on deposits and homing/interchange fees flowing between banks on transactions.
“This is more than enough income for us because we have very low internal costs by using innovative technology and being careful with our spending. Another cost saver is that we offer simple products with innovative functionality, which solves for real customer problems. Often, it’s the offering of all the unnecessary bells and whistles that becomes expensive.”
‘Be the change’
According to Human, the bank’s model has already disrupted the South African banking sector.
“Just as we announced that we were launching and hinted at zero fees, and then also when we first announced our actual zero pricing guide, a number of the other banks dropped their entry-level accounts to a zero fee.
“That is of huge benefit to customers. We also believe that our full-digital-only offering has assisted in shaking up all banks to be as digital as possible. There is a reason why our slogan is ‘be the change’ – we have always had this intention.”
She reveals that later on, Banks Zero will offer new products via a marketplace (ie, partnerships with other suppliers) “and not us ourselves – we want to stay as focused as possible while still providing future customers with a comprehensive offering”.