African Bank says it is going to offer the lowest-cost transactional bank account in SA and anticipates that it will dislodge Capitec’s position as the cheapest bank while also promising one of the best digital offerings in the market.

"We have done an analysis of the different banks’ fee structures and we are confident that we have the best value proposition," said African Bank group CEO Basani Maluleke during the presentation of the bank’s financial results for the year ended in September.

Capitec charges only R5.80 for its monthly administration fee for its Global One debit card and R35 a month for the credit card. Cash withdrawals are R1.61 at major supermarkets and R6.56 at Capitec ATMs, and that fee is fixed regardless of the amount withdrawn.

Earlier in 2018, Publisher Audience Measure Survey data showed that Capitec had become SA's largest bank in terms of the number of customers who used it as their main bank. The bank had 10.5-million customers at the end of June.

The bank, which relaunched two-and-a-half years ago following the 2014 collapse, is set to launch a transactional banking product in the first half of 2019. The transactional account, together with the African Bank app, are already in pilot phase with about 3,000 of the bank’s employees now using it.

With three new banks entering the transactional banking space in 2019 — Discovery’s bank, TymeBank and the PostBank — African Bank is entering a tightly contested space.

"We are very cognisant of the fact that the other banks are coming on stream and we’ve done an analysis of where we think those banks are going to play. We are comfortable.

"We do think that our value proposition is a sufficient differentiator," said Maluleke.

She said African Bank’s transactional account will be digital-based and can be opened and managed fully online.

While African Bank is traditionally known for unsecured lending, the "good bank" that came out of the 2016 relaunch wants to make transactional banking a big part of its operations. Maluleke said they were expecting "a really good take-up" and were counting on it to arrest the decline in the bank’s customer numbers.

African Bank’s customer base decreased to 1.05-million customers by the end of September 2018 from 1.25-million in 2016. The bank has a target to increase its customer base to 2.5-million by 2021.

"We’ve always anticipated the decline in our customer numbers, particularly given the constraints that we have made over the last few years in terms of tightening our credit policy," said Maluleke.

The bank said it was not concerned by this decline because it has been a trade-off for improved customer profile. "We are lending to fewer people but we are giving larger loans and those loans are definitely performing well," said African Bank CFO Gustav Raubenheimer.

African Bank recorded a 21% increase in new credit issued and its gross advances book grew 4% to R27.4bn. The average loan size increased to just more than R39,000. The bank said 88% of all loans were given to low-risk customers and 12% of those customers used their loans to settle existing African Bank debt.

The bank said it would look to attract retirees as customers.

The improved risk profile of its clients helped African Bank decrease its credit impairment ratio to 11.7% from 12.7% in 2017 and partly attributed the 29% growth in its operating profit to R1.45bn to this lower impairment charge.

The bank grew retail deposits by 225% to R1.1bn in the year to September. It now has more than 15,000 retail deposit customers with an average deposit of R72,000.

"We are not too surprised given that we pay the highest rate in the market across our product suite," said Maluleke. People were beginning to see African Bank as more than just a "loan shop".