Picture: ISTOCK
Picture: ISTOCK

Michael Jordaan-backed Bank Zero is set to become SA’s first mutual bank since 2012, promising simplified fee structures and considerable black ownership and allowing depositors to become shareholders.

Bank Zero, which is an app-driven bank co-founded by Jordaan, a former First National Bank (FNB) CEO, announced on Tuesday that the South African Reserve Bank had granted it a provisional banking licence.

It planned to launch in the fourth quarter of 2018, joining VBS, 141-year-old GBS and Finbond to become SA’s fourth mutual bank.

Bank Zero would be 45% owned by its black co-founders, which included former FNB executive Yatin Narsai, Jordaan said on Tuesday.

"We will share their details as we draw closer to the official launch date." There were seven co-founders in total, all highly experienced in banking and technology, he said.

If it gets off the ground, Bank Zero will join a growing list of newly launched or soon-to-be launched banks in SA.

Digital entrant TymeDigital started in 2017 with backing from Commonwealth Bank of Australia and Patrice Motsepe’s African Rainbow Capital (ARC). Post Bank and Discovery Bank are expected to open their doors later in 2018 to much fanfare.

It is possible ARC — which has a stake in another Jordaan-backed start-up, mobile network operator Rain — is an investor in Bank Zero, although this could not be confirmed.

Jordaan, widely accredited with placing FNB ahead of the digital curve, believes there is yet space at the table for banking start-ups. "Retail banking should be far more competitive and many fees should be simplified," he said. "We also think that the business segment is neglected. Business owners need more transparency and control."

Keeping his cards close to his chest, Jordaan said only that the bank would focus on transactional banking and deposits.

"There are already many providers of loan products, but South Africans actually need to save more."

Encouraging saving lies at the heart of the mutual bank model, which is why it is common for depositors to own shares in mutual banks — referred to as mutual savings banks. "The mutual bank framework is capital efficient, allowing us to pass on more benefits to customers," he said.

While this will be music to the ears of many financial advisers, banks make a large chunk of their money by charging interest on loans and it is unclear how Bank Zero plans to plug that gap. It may want to start by tapping the informal savings, or stokvel, market in SA, which the Treasury estimates attracts nearly R50bn annually.

Fortunately, launching a bank from scratch gives Bank Zero, and the likes of Discovery Bank, the dramatic advantage of having no clumsy or expensive legacy systems to contend with.

Being a purely digital player gave Bank Zero an edge over incumbents, but it would need a compelling value proposition to attract customers, said Christo Davel, the former CEO of online bank 20twenty and creator of savings tool 22Seven.

Attracting customers is the key challenge for all new banks, but this looks to be a conducive environment for them. Mobile-only banks are taking off globally — with Monzo gaining traction in the UK and N26 set to launch by mid 2018 in the US — as regulators push towards "open banking".

Last week, the European Commission’s second payment services directive came into effect. It requires banks to open their payments infrastructure and customer data to third parties, who can then provide payment and other services to bank customers.

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