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TymeBank, Discovery Bank see customer gains during lockdown

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SA’s digital banks – TymeBank and Discovery Bank – have reported an upswing in on-boarding new customers during SA’s lockdown, as more consumers look to branchless banking channels for their financial services.

The banks say the COVID-19-triggered lockdowns and social distancing protocols led to more local consumers shifting their banking behaviour, resulting in customers responding favourably to their value proposition and low costs.

While the economic upheaval caused by the pandemic has had a significant impact on the financial services sector, with some banks seeing defaults on loans and low deposits, the crisis also led to an overall increased uptake in online services, with South African banks witnessing increased use of digital banking channels.

Tauriq Keraan, CEO of African Rainbow Capital-owned TymeBank, says while the initial lockdown levels resulted in a business slowdown, the gradual easing of lockdown restrictions has seen the bank sign-up a record number of customers.

The bank, which adds an average of 100 000 to 120 000 customers a month, breached these numbers in May.

“Due to the lower footfall to Pick n Pay and Boxer stores, initially fewer people visited our kiosks, resulting in the bank on-boarding approximately 20% less customers in April.

“But, with the easing of lockdown, as we moved to level four and three, we have seen an increase. In May, for instance, we saw a full recovery in customer on-boarding, having on-boarded over 150 000 new customers in that month alone,” notes Keraan.

TymeBank has attracted a total of 1.9 million customers since its launch in February 2019, with small business customers accounting for 15 000. The bank’s rapid increase in business and personal banking customers will see it meet its two million target sooner than expected, according to Keraan.

“We have also seen a steady rise in deposit levels during this period, in terms of the deposits in our savings product GoalSave, as well as deposits in the transactional Every Day Account. We believe COVID-19 has introduced significant economic uncertainty for consumers and they are exercising cash preservation. However, the fact that TymeBank is offering attractive savings rates, no monthly fees and low transaction fees, should also be seen as a contributing factor for growth."

The bank has a partnership with over 800 Pick n Pay and Boxer stores, and allows deposits and withdrawals at 1 500 retailers nationally.

Last month, TymeBank was rated the second best bank in SA, on the Forbes list of the world’s best banks. Capitec was rated first, while other banks in the top five in the country include FNB (third), Nedbank (fourth) and Bidvest (fifth).

Discovery Bank, which launched in March 2019, describes itself as the “world's first behavioural bank", offering products designed to help customers improve their financial health and rewarding them for “banking healthier”.

Akash Dowra, head of client insights and technical marketing at Discovery Bank.
Akash Dowra, head of client insights and technical marketing at Discovery Bank.

Akash Dowra, head of client insights and technical marketing at Discovery Bank, told ITWeb the bank has seen a constant increase in new customers, even during lockdown.

“We have seen a steady growth in client numbers and customer engagement. This can be attributed to Discovery Bank’s two key competitive advantages. Being a fully digital bank means our clients do not need to go to a branch, as we offer paperless on-boarding via our app. Secondly, our shared-value approach sets us apart – Discovery Bank is the only bank in SA that offers dynamic interest rates,” explains Dowra.

Discovery Bank has over 200 000 clients. Its behavioural banking model is premised on rewarding clients with discounts at Discovery Vitality’s partners, and other incentives.

“We have also seen strong growth in our deposits as clients respond favourably to our dynamic interest rates, which give them an opportunity to earn market-leading interest based on how well they manage their money through their Vitality Money status,” states Dowra.

Nic Ray, CEO of research firm BrandsEye, says the COVID-19 crisis and social distancing led to a significant increase in customers looking for services on digital channels, a trend likely to continue into the future.

"SA’s new digital banking entrants are unencumbered by the legacy issues that have often slowed the pace of innovation and digital transformation at the established banks. The banks that have performed well in our annual Banking Sentiment Index have traditionally been able to deliver on the basics, delivering excellent omni-channel customer experience with reliable mobile apps and responsible online customer service.

“The banks that are able to equip their teams to deliver excellent customer experience across channels will have a significant opportunity to differentiate themselves in the market during this period. If the new entrants are able to do deliver on this, they may be able to challenge traditional banks for market share," asserts Ray.

Tauriq Keeran, CEO of African Rainbow Capital-owned TymeBank.
Tauriq Keeran, CEO of African Rainbow Capital-owned TymeBank.

Knock-on effect on competitors

Competition in SA’s digital banking space is intensifying. SA’s third digital bank, Bank Zero, is in beta phase and is expected to launch its public beta in the second half of 2020. In November, the bank went live with its debit card among a small group of people, including employees.

“Following this card go-live, rigorous health-checks, such as simulated card attacks, card fraud detection and retailer readiness, are under way. Thereafter, the final countdown to starting public operations will begin,” said the bank at the time.

Discussing Bank Zero’s likelihood to succeed in SA’s increasingly competitive banking market, Arthur Goldstuck, head of World Wide Worx and chairman of Sasfin Bank’s Digital Advisory Council, says the increasing competition is healthy for business and is 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,” notes Goldstuck.

According to Goldstuck, TymeBank’s ability to sign up new customers has been matched only by Capitec, with a huge customer base expected to provide an opportunity to evolve its services and become a formidable competitor to the major banks over time.

With TymeBank, Discovery and Zero each addressing different consumer needs, this will lead to a knock-on effect on traditional banks. However, he rules out any chances of the digital banks dethroning local incumbent banks.

“The aim of digital-only banking is not to overthrow traditional banks, but to provide consumers with new options and alternatives, and ultimately drive modernisation of the industry as a whole.

“Their primary objectives are, on the one hand, to service consumers who were not being served before, and on the other hand, to service consumers who want more innovative, seamless and digital means of conducting their affairs. The knock-on effect, as major banks lose clients to the newcomers, is that the industry itself will evolve, the incumbents will become digitally transformed, and customer experience as a whole will improve,” concludes Goldstuck.

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