TymeBank’s Retail Capital buyout deal gets thumbs up

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 01 Nov 2022

The Competition Tribunal has approved the deal whereby digital bank TymeBank wants to acquire fintech firm Retail Capital.

In August, African Rainbow Capital (ARC)-controlled TymeBank announced it had reached an agreement with Retail Capital and its shareholders to acquire 100% of the fintech SME funder’s shares, subject to regulatory approval.

At the time, TymeBank CEO Coen Jonker said the acquisition will see Retail Capital become a division of TymeBank and the foundation of the bank’s expanded business banking offering.

The value of the investment in TymeBank increased from R1.1 billion at 30 June 2021, to R1.4 billion at 30 June 2022, representing a 13% uplift.

In a statement yesterday, the Competition Tribunal says it has unconditionally approved the large merger, whereby TymeBank intends to acquire the entire issued share capital in Retail Capital.

The competition watchdog says post-merger, TymeBank will have sole control over Retail Capital.

TymeBank offers customers personal and business transactions, savings accounts and value-added services comprising credit card, prepaid and health insurance services, as well as funeral cover, the regulator says.

The target group is a fintech company that provides alternative non-traditional funding (unsecured lending) to small and medium enterprises, as well as asset financing.

Retail Capital’s aim is to lower the barriers to funding for SMEs through a three-step online application process, and it has provided more than 43 000 business owners in SA with over R5.5 billion in working capital in the last 10 years.

TymeBank is a digital bank that leverages the use of digital technology with the goal to make banking simple and affordable.

The bank is focused on acquiring customers who want to benefit from lower banking costs and improved customer experience.

TymeBank CEO Coen Jonker.
TymeBank CEO Coen Jonker.

Increasing reach

In its integrated report 2022, ARC, founded by business magnate Patrice Motsepe, revealed fintech is becoming an increasingly important component of its investment strategy.

The report notes the buyout will also see Retail Capital’s lending expertise being combined with TymeBank’s deposit base and operations to serve a broader customer base.

TymeBank’s value proposition is to use technology to increase physical and financial access to banking services.

According to ARC, “structural cost advantages increase TymeBank’s ability to provide the simplest and lowest price transactional bank account in the market, with data and analytical capabilities to enable advanced credit decisioning, as well as significant operating leverage through process automation.”

It notes the bank increased its customers in the three years since launch to five million, notwithstanding COVID-related challenges that stalled many initiatives.

“It has been 36 months since the public launch of the bank. The bank has demonstrated resilience in account openings, active accounts and launching new products,” says ARC.

“In addition to Pick n Pay, several hundred TFG kiosks were launched in August 2022. During the period, TymeBank conducted a closed capital raise, during which Tencent and the CDC invested in TymeBank and Tyme Global.”

TymeBank received $150 million (R2.7 billion) as part of the capital raised, while Tyme Global received $30 million (R547 million).

Tyme Global is a digital banking group, building high-tech, high-touch banks in fast-growing, emerging markets. It is based in Singapore and represents the holding company through which the multi-country banks will be launched, says ARC.

The first such bank is TymeBank in South Africa, followed by GoTyme in the Philippines, with an application for a digital banking licence in Pakistan currently under way.

Tyme Global owns the technology platform and intellectual property globally.

Anytime banking

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.

The latest digital bank to open shop in the country is Be Mobile Africa, which entered the local market in September.

The key differentiator of these new branchless banks is that they ensure competitive rivalry in the local banking sector, through agile offerings and lower costs.

This has seen traditional banks accelerate their digital-first strategies and aggressively reposition their platform-based model, to offer customers innovative financial products and services.

Andre Wills, MD of Africa Analysis, recently told ITWeb that while competition in the local market is intense, the growth of existing branchless banks demonstrates there is appetite for using such services.

“Digital-only banks enable the unbanked population to access banking services. This is a significant benefit, as it creates financial inclusion for this group of people who then benefit from a wide variety of banking and payment services.

“Branchless banks are able to service any customer in any location around the clock, provided there is some form of connectivity (eg, banking apps on mobile phones).”