The retail banking industry is one of the most susceptible to disruption. Most of the innovation we have seen in recent times has been around technology. Last year, FNB was named Most Innovative African Bank at the 2017 African FinTech Awards, for the second year in a row. The man widely credited with getting it to this innovative status, former CEO Michael Jordaan, has himself established a challenger in Bank Zero, whose value proposition seems to be, once again, technology.
Then there is entrepreneur Patrice Motsepe and his TymeBank. Again, the proposition is banking through an app, and via retailers - neither of which is new to the market.
I remain sceptical about these two new entrants for several reasons, the biggest of which is the over-reliance on technology as a differentiator, and the fact that they have no customer base to leverage. The Big Four banks take a lot of criticism for being archaic and slow in innovation. But the truth is that virtually all of them are providing quality 24/7 online banking services. In addition, SA's leading banks have millions of customers who are too lazy to change banks unless there is a compelling reason to do so - which is essentially what Capitec provided the market with.
So if all you are offering is a digital platform with a few gimmicky features, some lower fees and not much else, I am not sure how you will compete - unless youcombine the power of technology with deep insights into a clear segment of the market you seek to wow.
That is what I saw at African Bank's launch of its transactional banking offering called MyWorld. It seems the bank has taken the trouble to understand its target clients' unique needs. They tend to be everyday, middle-class, working South Africans. The bank's research revealed that they would like to transact and save as individuals, as well as together with their family, friends and community. So the bank created an offering that allows a customer to do all this on their mobile app, a feature phone, through the contact centre and at any branch.
In short, customers can create up to five additional accounts or pockets under the main account, with no monthly account fees on any of them. You also don't pay for any banking done online or on the app. Charges apply only when you draw cash and swipe to purchase.
The pockets can either be for transacting or for saving. Each user has their own bank card, with the primary user getting a personalised, black, embossed card that can be printed at a branch in a matter of minutes - apparently a first for SA.
The savings pocket earns 6.5% per annum in interest, while the power pocket, the one for transacting, earns 5.5%, thus creating a compelling reason to save. Funds can also be transferred between the shared accounts, which should be a hit for families with school- or university-going children, or even young adults with parents living outside of the city centres where they work.
The bank also allows savings clubs to bank on the platform. The main account holder is able to open a club account, and club members make deposits and have viewing access through the app or online. My only concern here is the limit of 10 members. Being an ardent member of a few stokvels and social clubs, I fear this limit could undermine the potential of this offering.
Many will argue that some elements of the African Bank proposition are not new to banking in SA, but it is the packaging, based on authentic insights into a clear target market and accessible technology through a number of channels, that I find innovative - something I cannot say for the new entrants.
This article first appeared in the Business Times section of The Sunday Times on 26 May 2019