Old Mutual wants its bank firing on all cylinders in 2025 with the promise of lower banking costs and by applying the latest technology solutions in a highly competitive banking landscape.
In April the insurance giant received the nod from the Reserve Bank’s Prudential Authority to establish its own bank, and in September named Clarence Nethengwe, MD of its mass foundation cluster, as CEO designate.
OM Bank will primarily service upper mass market and lower affluent consumers with a monthly income of between R5,000 and R80,000 a month.
Old Mutual CEO Iain Williamson told Business Times that establishing the bank was a no-brainer, as Old Mutual already did a lot in the business of banking. “Our unsecured lending book is sitting at R16bn. We have about 400,000 active transactional account users in our transactional banking solution, which we do under Bidvest.”
The group also has a home loan product in partnership with SA Home Loans. “We have a lot of the components of banking, and we have shown ourselves that we can be successful in that business in terms of the scale of it. We have not brought those things together in one cohesive entity,” he said.
Williamson said the banking licence paved the way for the company to raise deposits and in turn lower the cost of funding the loan book. “There’s a potential to increase our profitability if we can raise deposits on the back of the loan book that we already have. In a way, the decision to get a banking licence was the easy part of the decision, because essentially, we do a lot of that stuff already, there’s a strong financial case for why our licence makes sense.”
The harder decision was whether to build their own bank or buy one of the smaller banks on sale; but what’s available in the market falls short of expectations. “Either they do not fit with us, or they have technology challenges, platform challenges, brand challenges, or whatever it is. We decided we would leverage our own brand and leverage the kind of technology that is available out there today to build something truly different.”
The bank would be highly digital, Williamson said, but also complemented by Old Mutual’s extensive physical infrastructure. “It’s a digital-first offering, I’d not say it’s a digital exclusive offering but the primary mode of interaction with a customer will be a cleverly and intelligently designed app. Customers will have access to our existing branch footprint for any issues that might arise. We’ll seek to complement the core bank’s capabilities with the rest of the customer touch points in the Old Mutual Group.”
While the big five — Standard Bank, First Rand, Nedbank, Absa and Capitec — dominate the banking market share, new digital banks such as Discovery, Tyme and Bank Zero have shaken the market.
Williamson said Old Mutual was unfazed by the stiff competition. “We’re not doing this with our eyes closed. We think this proposition will be differentiated in view of what is available on the market today. We have to wait and see until next year. We have done all the things to set up the bank for success.”
Meanwhile, the insurance giant has become the latest financial services provider to launch a mobile virtual network operator (MVNO) through its Old Mutual Connect, in partnership with Cell C. Through the MVNO, the company aims to provide SIM cards for R5 at any Old Mutual branch as it eyes lower connectivity costs.
In September, the Reserve Bank slapped Old Mutual with a R15.9m penalty after some of its procedures were found wanting, especially compliance with anti-money-laundering regulations.
Williamson said the group is fixing those issues and takes them seriously. “It is fair to say the bar is set high in terms of how rigorously those processes need to be conducted, and I think appropriately so, particularly in the light of the fact that we are greylisted as a country.
“One of the reasons we get greylisted is because of concerns around whether controls in this area are robust. I think it’s important to have very robust controls in that area. Where we do have shortcomings in our administrative processes we have to own that and fix it.”
