Shoprite, SA’s largest grocery retailer, is looking to capitalise on its huge client base and data points to disrupt the banking sector by banking its client base as it searches for new revenue streams, with the group already raking in on average R4.9bn in weekly sales.
Group CEO Pieter Engelbrecht said the group is primed to offer banking solutions to its client base, with the company having recorded about 1.2-billion customer visits in the year ended June, when it reported record sales of R252bn.
“You’re going to see us enter the banking world. We already have a banking account, which we have not started marketing. The account will be the only zero-cost bank account in the country. We are definitely going to enter the financial services area more aggressively,” Engelbrecht said.
“We have customers who trust the brand. [Because of this trust] we feel comfortable to get more involved in the financial services world.”
Engelbrecht, who presides over a retail major worth about R152bn on the JSE, said the group is encouraged by the early data on its money market account and consumers’ brand affinity with it.
"[We already have] a money-market account. A very basic account. Our customers have told us they want to be in full control of their money. That account will, for example, not allow debit orders. We already see a lot of grant recipients using that account. That part of the business is still small as it is still in its infancy stage,” he said.
“Our customers will [then have an opportunity] to migrate to a fully fledged bank account that customers can use anywhere with minimal fees. But as long as a customer uses the card to transact within the Shoprite real estate, the transaction cost will be free.”
The SA retail sector is seen as the one most open for disruption, with the country increasingly becoming a multi-banked society where consumers hold accounts with different banks for different reasons.
The Patrice Motsepe-backed TymeBank has quickly amassed more than 10-million clients after going to market in 2019, the second-fastest growing bank after Capitec, which boasts an army of about 25-million clients.
The exponential growth of Capitec, worth more than R400bn both in scale and product offering, is seen as a case study on how to bring into the system people previously thought unbankable.
Engelbrecht was quick to say it is not looking at challenging Capitec’s hegemony, but rather sees the Stellenbosch-based bank as a potential partner.
“Capitec is a fantastic story. We have a large overlap of customers. That is an opportunity for us to work with them. There are things we can do with them, and we most probably do, like we have partnered on the Checkers side with Discovery,” he said.
Banks have already used SA’s vast retail footprint to great effect in a phenomenon called agency banking, while they cut down on the branch network as consumers increasingly move to digital platforms to conduct transactions.
Agency banking in SA amounts to licensed third-party retail distribution channels such as retail stores and supermarket chains. SA lenders use the network of retail chains to expand their reach to underserved communities.
The basic financial services facilitated through agency banking range from cash-in services (cash deposits, fund transfers and bill payments) and cash-out services (cash withdrawals and payment receipts) to opening new transaction accounts, such as Shoprite and Pick n Pay money market accounts.
Studies have shown that agency banking via retail stores has become the preferred distribution channel for South Africans after ATMs.
The move by Shoprite comes as the SA Reserve Bank is working on a draft law to revamp the national payments ecosystem, setting the stage for the biggest payments reforms in a generation.
Under the Bank’s 2030 strategy, which elevates payments modernisation to a core strategic pillar, alongside price and financial stability, it estimates that faster, cheaper digital payments could trim the economy’s R30bn annual cash-management cost and widen access for underserved households and businesses.
The mooted reforms by the Bank will see non-banks enter the clearing and settlement system in a move that will see the hegemony of the traditional banks further challenged by fintechs.
OM Bank, Old Mutual’s banking offering, is expected to go to market before year-end.
OM Bank will not roll out ATMs across the country but will be entering into partnerships with retail outfits to make its services available to consumers.
The bank marks Old Mutual’s re-entry into the banking sector after its disinvestment from Nedbank in 2018 as part of the group’s managed separation.
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