Bank Zero, an upcoming app-based banking service with low rates, can have a positive impact on existing banks.
This is according to Standard Bank South Africa’s executive head of ecommerce, Lunga Siyo.
Siyo told MyBroadband there is a place for an app-only bank in the country, in the case where banking needs are simple.
“This would, for example, include the depositor-only customer, or those customers that do not require daily transactional capabilities,” he said.
As customer needs grow, however, there is definitely a place for the branch where specialised advice can be provided for each customer.
“It is simpler, when customer needs are complex, to be sourcing your financial products from one source where the overall picture is taken into account.”
Siyo said every new bank entrant, like Bank Zero, is a threat to existing market share – as their offerings target specific customer segments.
The question, though, is whether the market share being targeted is a loss-leader or contributor to the bank’s headline earnings.
“This [the launch of Bank Zero] could actually have a positive impact on existing banks,” said Siyo.
“In most cases, we will find that customers that are attracted by the product offering – like favourable interest rates for deposits or lower fees – may test the bank as a secondary option.”
If the existing banking relationship can offer equivalent interest rates on deposits or match the fees, however, there may not be enough to entice them across.
“Remember that this app-only offering has only two offerings – savings accounts and business banking,” said Siyo.
“In the case of business banking, lower fees are not enough to change an established relationship.”
He said that most businesses rely on the relationship they have with their bank to secure short, medium, and longer-term funding.
“Fees are only one aspect of the overall relationship.”
Siyo said it is difficult to determine whether the value being delivered by Bank Zero can be compared to traditional banks.
“It will be interesting to monitor the churn rate of the new bank where customers migrate in the hope of better value, but find limitations in the offering, which account for the lower fees being charged,” he said.
“I believe you may find customers testing the waters to understand the full extent of the offering to see if it fits their banking requirements.”
He said the benefit to customers is that the service levels from all banks will be lifted to ensure their value is understood.
Capitec Bank’s executive for marketing and communication, Francois Viviers, agreed, saying competition drives innovation and efficiencies within the industry.