Former FNB CEO Michael Jordaan recently announced the launch of Bank Zero in South Africa.
Bank Zero will be app-driven, and promises to offer clients lower fees, richer functionality, transparency, and better control.
The bank will have no branches, but customers can use ATMs locally and internationally to access cash.
All processes have been designed from the ground up with digital interaction in mind, and all communication will be app-driven.
Another unique selling point is that customers can become shareholders of the bank, based on the type of savings products they have.
MyBroadband spoke to Jordaan about how the bank will work, and why people will use it.
What are Bank Zero’s biggest selling points compared to traditional banks?
All will be revealed when we launch, hopefully end 2018. We hope to offer richer functionality, transparency, and control. Fees for digital payments can be much lower (even zero), especially for businesses, while the interest on savings can be higher.
What will Bank Zero offer in terms of new functionality?
For competitive reasons we can only fully disclose this at launch. As a principle, we will do everything electronically, including many aspects of banking that currently still need paper or face-to-face interactions.
Is your strategy to get people to move their accounts from traditional banks to Bank Zero?
We will not offer credit so for any person or business that needs loans, we will be a secondary account.
How will you handle business and personal requirements like having an original bank-stamped letter which requires a physical banking presence?
We have considered this requirement and plan to reveal a solution at launch.
Will you partner with traditional banks for services?
Not currently planned. We will work with and compete with all the banks out there. As part of integrating with payments systems, we will need a mentor bank – but that is behind the scenes. Our deposits will be invested with other banks based on the rates offered, but this too is normal treasury activity and behind the scenes.
Can you provide more information about customers becoming shareholders?
This has not yet been decided.
Who is backing Bank Zero, and how do people know their money is safe?
The shareholders are the current employees and directors. By not offering credit we have eliminated the reason that 80% of banks fail. We will also use technology to reduce security risks. In addition, we have a very simple business model that does not have funnies like derivatives, trading, and other risky activities. Finally, we will have a very high capital adequacy ratio.
What is Bank Zero’s business model?
It is important to understand how low our cost structure is. We will probably end with only 15 employees. They are sitting in a simple, open-plan office without a canteen (nor an art collection or wine cellar). This means that our revenue can be much lower than conventional banks and we can still be profitable. Our major revenue streams will be the difference between retail and wholesale deposit rates and the interchange earned on card swipes which is paid by merchants, not customers.
Financial expert David Shapiro said with an economy which is not growing, the country does not need another bank. He added that most people are happy with their bank. Is he wrong?
Of course he is wrong, as he is thinking of old-style banking – including loans. David probably also wants a full-service model (a branch and a relationship manager). In fairness, there are many others who want this too and are willing to pay for the privilege. Fortunately, there is also a younger, mobile-savvy generation that wants to bank in the same way they use Facebook, WhatsApp, and Instagram – and will be drawn by the simple, rich functionality of the Bank Zero App and low or no fees.