It is finally here. More than three years after the launch of SA’s two other challenger banks, TymeBank and Discovery Bank, Bank Zero has finally launched to the public. It seems to have modest ambitions. It will not provide loans, nor any of the usual banking bells and whistles, such as reward programmes. In most cases it does not charge for its services.
The management team’s passion is technology, not client service or marketing. While chair Michael Jordaan is the public face of Bank Zero, his colleagues, led by CEO Yatin Narsai, would far rather write code in their bat cave in an obscure part of Bryanston, north of Johannesburg, than go on the road to meet the public.
Jordaan chuckles that this is the first time a bank has been accused of making too little money. As CEO of FNB he made that bank highly profitable, providing a complex honeycomb of services. The Bank Zero management team served loyally under Jordaan until he left in 2013. But a year later Narsai, the then head of IT and retail banking at FNB, realised the fun days of FNB were over and it had morphed into something more serious.
The Bank Zero gang did not buy into the current FNB CEO Jacques Celliers’s vision — he prefers to call FNB a platform rather than a bank. For now Bank Zero will focus on getting its banking operation right, not worrying too much about letting customers pay parking fines or book a massage through the banking app.
Discovery Bank CEO Hylton Kallner says as strong believers that the future of banking is digital, the group considers Bank Zero to be collaborators in this space. “We know the Bank Zero founders well from our history at the Discovery Card [administered by FNB before Discovery Bank was formed] and we wish them good luck,” he says. And Discovery rarely compliments competitors.
But unlike Discovery, Bank Zero does not run on a big-ticket software system such as SAP but on a hybrid of open source and home-grown software. The investment in technology, not yet disclosed, has been considerably lower than Discovery Bank’s bill north of R4bn.
Of course, the two operations had completely different goals. Discovery wants to offer a full suite of financial products and keep a stranglehold on its clients by getting them hooked on acquiring Vitality points.
Jordaan says Bank Zero enjoys sources of income that aren’t always visible to clients: it earns commission on the airtime, data and prepaid electricity it sells. And like all banks it makes a margin between the interest rate it pays for finance in the wholesale market and the rate it pays out to retail investors.
But he says the real secret is the low-cost base. Nobody would mistake the Bank Zero bat cave for the marble-clad Standard Bank head office. There are 30 staff. And senior management — all equity investors — are not earning salaries. Jordaan says the small-business market is Bank Zero’s low-hanging fruit as it is the least competitive area of the banking sector, where fund transfers and debit costs remain costly.
Jordaan says Bank Zero will break even at 100,000 clients. During the years in which it was being built Jordaan had a simple and catchy message: the clue to our cost structure is in the name. Narsai, ever the technology geek, prefers to focus on the unique mathematical and philosophical nature of Zero as a number (if it is indeed one). But presumably the bank is not aiming to score zero on the promoter scores banks love to talk about in their PowerPoints.
Narsai says there is no need to invest in a large call centre as clients have indicated an overwhelming preference to communicate by e-mail. And he will help clients avoid the embarrassment of debit orders being returned for insufficient funds by informing them of the problem and then giving then 24 hours to switch money to cover it. If they can’t cover it, the nuisance fee is a nominal R2.
As Bank Zero doesn’t have branches or even ATMs, Narsai is counting on a rapid decline of physical cash payments. The banking industry charges R9 per R1,000 drawn and he expects alternatives such as digital QR codes to take over, even for buying a Coke and a packet of crisps at the local garage.
Narsai says he is less worried about the legacy banks than about the quasi-banks being set up by technology giants such as Apple, Google and Samsung. But there is a large barrier to entry, as in SA the Reserve Bank makes it tough to earn a banking licence. In that sense, ironically, Bank Zero is now a legacy bank.
• Cranston is a Financial Mail associate editor.
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