Taking aim at the unbanked
NEWS ANALYSIS: The new digital bank on the block
Digital outfit with huge resources has rolled out a mass-market strategy in Indonesia. Now it’s about to hit SA
TymeDigital by Commonwealth Bank SA is quite a clunky name for a new-age bank. It is a lot less catchy than 20Twenty, SA’s last digital bank, which collapsed 10 years ago. But the SA Reserve Bank has learnt a lesson from 20Twenty, which had uncommitted shareholders:parent Standard Chartered dumped it at the first sign of crisis in SA.TymeDigital’s parent company, Commonwealth Bank of Australia, has been rolling out a mass-market digital strategy in Indonesia and Vietnam and sees it as the best way to penetrate the unbanked.It has no shortage of resources. With a market cap of A$134bn (R1.4 trillion) it is larger than the entire banking sector of the JSE. Tyme has the foundation of its black economic empowerment strategy, having sold a 10% stake to Patrice Motsepe’s African Rainbow Capital (ARC). In time there could be tie-ups with other ARC companies; Alexander Forbesneeds ever cheaper banking for its pension fund administration, for example.The Commonwealth Bank connection certainly helped TymeDigital jump the queue of new bank applications, ahead of Discovery Bank and the Post Office’s Postbank.Tyme MD Sandile Shabalala says there will be no traditional branches but on day one there will be 710 points of contact through the Pick n Pay and Boxer store network. Pick n Pay’s previous banking relationship with Nedbank, known as Go Banking, has been dissolved.
TymeDigital’s first product, ironically, has been the distinctly low-tech one of money transfer, which dates back to the days of the telegraph in the 19th century. Shabalala says, however, it will be given a modern twist.He had the good fortune of being able to recruit most of the team from MTN Mobile Money. The troubled cellphone operator disbanded the unit as it had other fires to fight.Money transfer was the ideal product line for TymeDigital to come into the market. It did not need a banking licence for it, and it only received its full banking licence in September 2017, two years after it passed the first regulatory hurdle known as section 12. And its competitors are on the back foot as there have been some large fines to money-transfer shops that have not followed Fica regulations.The team devised a system: instead of registering every time, new applicants will be expected to give their ID and fingerprints and everything else needed to become Fica-accredited. This is then kept permanently on file.
Unlike some other supermarket chains (like Shoprite) money transfer does not have to be done at a single kiosk but at any point of sale. In due course TymeDigital will accept deposits and start to originate accounts through these kiosks. There may officiallybe only 280 staff at TymeDigital, but 2,000 new jobs will berolled out at Pick n Pay and Boxer to support the TymeDigitalproduct range. The 150 Boxer stores, which provide a limitedrange of about 500 discount products, are arguably a perfect cultural fit with TymeDigital.Shabalala says TymeDigital’s focus will be on the retail customer, as well as on the small and medium enterprise market. There will soon be facilities for electronic funds transfer, debit and credit cards and a range of loans and lending products — though these will certainly not be a dominant part of the bank’s range.Shabalala was previously head of Nedbank Business Banking. He says TymeDigital will focus on the underserved market, and willdevote resources to appropriate financial education. “We have set up the bank with low running costs, and we can pass these on. We are not making our clients pay for clunky systems. And we should be profitable much quicker than abank which plans to roll out a branch network.”Pick n Pay deputy CEO Richard van Rensburg says the National Payments System is a highly sophisticated national asset which works well. But SA banking remains far more expensive than it is in Europe or Australia — merchant fees can be four to five times as high over here. “If TymeDigital can force down transactionalfees it will be very good for the economy.”Van Rensburg says that while Go Banking offered similar services to Nedbank itself, TymeDigital can develop products exclusivelyfor digital clients. He says the alliance between a bank and a retailer makes sense.“Even Capitec recommends its customers draw money at our points of sale as it is considerably cheaper than using a third-party ATM.” At Pick n Pay alone there are 20m electricitybills and pre-paid electricity purchases every year. Pick n Pay also has 11m customers in its Smart Shopper programme, which gathers information about shopping spending habits. The Smart Shopper information could certainly be useful to TymeDigital.“We could expand the Smart Shopper ecosystem and perhaps TymeDigital can be our partner, but we haven’t accelerated the relationship to this level,” says Van Rensburg. But he says Pick n Pay can do more with TymeDigital than with any of the established banks.“Any of the Big Four, or even Capitec, would be competing with its other channels.” Pick n Pay had the option of waiting for Discovery Bank to launch. It already has a strong working relationship with the Vitality programme, as fresh foods bought at the supermarketget Vitality points.But Van Rensburg says Discovery will focus on the top end and have a client base more in common with Investec than with an inclusive mass-market bank such as TymeDigital. Pick n Pay, in spite of incursions from Woolworths, retains a strong client base among affluent shoppers. There will be opportunities to workon the expected overlap between the Pick n Pay and Discovery Bank client bases.“We aren’t shutting out any of the banks, we can’t let any of our customers feel they are getting a worse experience,” says Van Rensburg.