First National Bank's (FNB's) new offering, FNB Connect, is not a competitor for telecommunications companies, although the technology in place could give the providers a run for their money.
The bank has released a mobile VOIP offering and low-cost bandwidth solution, which has the industry excited about competitive opportunities. However, FNB Connect CEO Carmen Roux says the solution is not aimed at competing for telecoms customers.
“We are using it as a customer retention drive and possibly to sign on new customers. We are not competing with Telkom and the mobile operators. They are more concerned about the last mile and we are focused on service provision,” she adds.
While the bank declined to divulge its investment in the offering, it seems to have put up little in terms of capital. According to Roux, FNB has contracted internal staff members to manage the solution, which will be run almost entirely off the back of its own network.
She says it has contracted an external call centre to run the service aspect of the new offering. “As a business unit, FNB Connect has been set up to be self-sustaining. It must fund itself.”
The offering is only available to FNB clients.
What's on offer?
While FNB does not aim to compete against the telcos, it admits the low price point may drive the incumbents to lower their own tariffs. The bank buys its own connectivity in bulk wholesale, which has allowed it to compete in terms of price.
The data product is Surf, an unshaped bandwidth package that comes in as the cheapest offering available for ADSL users. The prepaid solution costs 6.9c per MB or R69 per GB. According to Roux, because it's a prepaid solution, any remaining bandwidth carries over for up to a year.
FNB customers will pay a once-off activation fee of R69, which includes 1GB of data. Top-up vouchers can be bought, ranging from R20 through to R1 000.
The second product is Talk, which is a VOIP offering that can be accessed from several devices, from a mobile handset through to a PC or landline phone. The solution comes in two flavours, ConnectChat and ConnectXtra, both of which have competitive call rates.
The FNB that could
FNB's technical capabilities could also put it head-to-head with the telcos. According to FNB Connect CIO Luis Simoes, the company has made some strategic solution decisions that allow it to run the services virtually.
The bank already has a vast national network that runs its financial services, and an existing billing system, which most telcos have to procure. While Simoes cannot detail the bank's networks, it is based on a fibre model, which gives the company room for capacity growth.
“On the hardware layer, we have more than enough capacity. We have also made use of a soft-switch which can scale the solution for more customers,” he adds.
With a target of 50 000 customers by the end of June 2010, the bank has provisioned with several upstream Internet service providers (ISPs) to allow multiple points for capacity growth.
With a network that is arguably more extensive than some of the incumbent telecoms operators, the chance for the bank's small ISP to blossom is there, should it decide to take it.
Banks need more
Analysts say the solution is an excellent marketing strategy. Denis Smit, MD of research firm BMI-TechKnowledge, says the banking sector has become extremely competitive and banks have to prove differentiators to retain customers. ”Ultimately, they are a bank and not a telco, but the price point should shake up the market a little,” he adds.
He notes that even the bank will have to contend with growing competition in the telecoms space. “Well established businesses, like Mxit, are looking at VOIP solutions. There will be plenty of competition over the next few years.”
However, the offering faces a tough legacy, as Absa's Internet service ended up being sold to Vox Telecom in 2007.
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