Digital banking shift in South Africa

Banking habits are shifting in South Africa, with digital channels becoming the primary means of transacting in the country and some local banks closing branches to adjust to the shifting habits.

In a recent statement, Standard Bank revealed that in-branch transactions declined by 13% in the first half of the year to around 2.5 million, with online transactions increasing by 30% to 1.5 billion.

“Online transactions increased by 30% to 1.5 billion transactions with Standard Bank clients performing an average of 10,400 digital transactions per month, compared to just 0.017 transactions in branches,” it said.

At the same time, it revealed that the bank had reduced branch square meters by 4% to 239,000m² without reducing access points for its customers.

It said the branch square meters figure equals about eight Ellis Park rugby stadiums.

“The number of points of representation in South Africa now standards at 654,” it added.

The bank said it actively planned its approach to shifting banking habits over the past five years and preemptively reduced the average square meterage of its branches with limited impact on jobs.

Standard Bank also noted that ATM transactions have increased significantly during the first half of the year, up 8% to 104 million transactions.

Standard Bank South Africa’s head of personal and private banking, Kabelo Makeke, said the bank has noted customers’ shifting transaction habits and will adjust to meet their needs.

“Our goal is to provide our customers with the best possible banking experience, whether they choose
to engage with us digitally or in person,” said Makeke.

“By adapting our branch network and enhancing our digital capabilities, we are ensuring that we remain responsive to our customers.”

Other major South African banks are observing significant upticks in digital banking activity, with some reducing their branch footprints as well.

Over the past five years, Nedbank reduced its branches from 600 to 547. Absa has reduced its branch footprint by 22 branches over the same period.

Nedbank told MyBroadband that the number of clients using its digital channels has grown by 9% since 2023, while its digital financial servicing volumes grew by 19%.

“We have seen a corresponding decrease in our in-branch volumes over the same period,” it added.

These reductions result from the growing adoption of digital banking solutions, such as online, mobile, and USSD banking.

The rise of digital banks in South Africa

Bank Zero, Discovery Bank, and TymeBank are purely digital banks operating in South Africa, with no branch or ATM infrastructure in the country.

However, they have proved immensely popular among South African residents. These banks generally offer low-cost accounts, with easy access to funds and transactions through their digital platforms.

Discovery Bank is the oldest of three prominent digital banks, having launched in 2018. TymeBank followed in 2019, and Bank Zero launched in 2021.

TymeBank is by far the most popular option, having amassed over 8.5 million customers in the country as of January 2024. It also lays claim to being the first digital bank in South Africa to reach profitability.

Its substantial growth is likely due to its low-cost banking approach, charging no monthly fees and offering most transactions for free. It only charges small fees for a handful of transactions.

Moreover, customers don’t need to have a minimum monthly income and can sign up for an account via the website or mobile app.

While Bank Zero also offers banking with no monthly fee, it launched two years after TymeBank, giving it some catching up to do.

Like TymeBank, most transactions are free, but customers must pay a once-off fee for their personalised card.

This costs R59 for the card and delivery in most metros, but customers further away from cities may have to pay R129.

Opting for pickup at a Clicks Store brings that charge down to R69.

Discovery Bank describes itself as the world’s first behavioural bank. It is also fully digital.

The bank hit the milestone of one million clients in August 2024, reaching a goal it had set for 2026. It hit one million accounts in June 2022 and has rapidly added customers since, reaching two million accounts less than two years later.

“Discovery Bank has reached the milestone of 2 million accounts — after announcing our first million accounts in June 2022. What’s most exciting is that the last 100,000 accounts came in just 41 days!” it said.

The bank offers a wide range of accounts with varying monthly account fees starting from R145 per month.

While its fees are typically higher than TymeBank and Bank Zero’s, indicating a different target market, it offers customers a wide range of benefits, such as healthy food, gym, and flight discounts.