Bank Zero launched to the public on 10 August, offering a bank account with no monthly subscription fee and low transaction costs.
Bank Zero has a unique offering. It has no bank branches and relies entirely on its smartphone app for most transactions and engagements.
If clients want cash, they can use any ATM or cash out at major local retailers.
Apart from low costs, Bank Zero’s value proposition includes patented card technology with greater security, advanced payments technology, and cost-effective QR payments.
Initial tests by MyBroadband show that Bank Zero has done a good job at making smartphone banking easy and affordable.
Having low banking fees and offering some nifty features may, however, not be enough to become successful in the crowded digital banking market.
Bank Zero is up against strong competitors with deep pockets, including FNB, Discovery Bank, TymeBank, Capitec, Standard Bank, Nedbank, and Absa.
However, Bank Zero’s biggest strength is not its affordability or its card with clients’ faces on them. It is its excellent management team and its nimble operating structure.
It has assembled an exceptional team of bankers, many of who were former FNB employees, to run the show.
Unlike other banks with big offices and hundreds of employees, Bank Zero is run like a lean start-up to keep costs as low as possible.
It has only 30 employees, and many senior executives are shareholders who do not draw a salary.
Keeping the business nimble not only reduces costs but also helps Bank Zero to operate efficiently and allow it to rapidly adapt to changing market conditions.
The quality of the executives in charge of Bank Zero stands out.
Former FNB CEO Michael Jordaan, who helped to make FNB the most innovative bank in the world, is Bank Zero’s chairman.
Former CEO of FNB retail banking, Yatin Narsai, is chief executive of the new venture, and he is joined by other former FNB executives Line Wiid, Lezanne Human, Mo Hassem, and Jay Prag.
What this team has achieved is significant. They received a banking licence in January 2018, and by the end of 2018, became a full settlement bank.
By the end of 2019, Bank Zero was certified by the South African Reserve Bank and Mastercard to issue and process debit cards.
It then built its banking platform using IBM Z mainframe computers and LinuxONE instead of using an out-of-the-box solution. This helps to keep costs down.
After everything was in place and the platform was thoroughly tested, it officially launched to the public.
The response from South Africans exceeded expectations. Narsai said their first day was incredibly busy. “We exceeded all our volume expectations. We never expected a response like this,” he said.
Narsai said they need below 100,000 customers to break even, which he expects to happen this year.
Even if Bank Zero is even mildly successful, it will become a big acquisition target. Many companies, including mobile operators, would love to have their own bank.
It is not possible for corporates to do things speedily and affordably, and buying a start-up bank, therefore, makes more sense than trying to start their own bank.
Whether Jordaan, Narsai and the rest of the management team are looking for a profitable exit is, however, not sure. They may well be in it for the long haul.
The image below shows the Bank Zero founders and management team.