Michael Jordaan built a name for himself as FNB CEO – and he says never expected to launch a competing bank.
Speaking to BusinessTech, Jordaan said that he was incredibly grateful for the exposure he gained working at FirstRand and the culture of innovation that the three founders of RMB encouraged.
“Their embrace of start-ups is what actually motivated me to invest in the 25 start-ups that I now back,” he said.
The story behind Bank Zero, however, begins long after Jordaan had left RMB, with a meeting of minds.
“I kept in touch with some of my ex-colleagues,” Jordaan said. “Yatin Narsai (former head of IT and Retail banking at FNB) came to visit at our beach cottage at the West Coast.
“I remember that many bottles of red wine were consumed and we moved from our first idea (using a Rasberry Pi device to bring down the cost of an ATM) to starting an App-based challenger bank.”
Jordaan said that Yatin subsequently researched and found the Mutual Banking licence as a lower capital route and assembled a team of mostly ex-FNB employees who had since resigned.
“The concept of a new bank stood out, as we would have no legacy technology – but more importantly, no legacy revenue streams to defend,” he said.
“We could use a very low-cost base to bring big benefits to consumers. It was an opportunity to not just be 10% better than the norm, but 10 times better.”
Bank Zero was co-founded by CEO Yatin Narsai, and Jordaan, who will serve as chairman of the bank.
The digital banking group makes use of a mutual bank licence, granted in 2018. Mutual banks, or mutual savings banks, are banks that typically operate without capital stock, and are owned by their members who subscribe to a common fund.
This, the bank says, will provide for a capital-efficient framework, and Bank Zero will be sharing the subsequent cost benefits with its customers (both businesses and individuals).
According to Narsai, the group will use mobile technology and other innovations to give more financial transparency and control to customers “in an intuitive, secure and affordable way”.
“Coupled with the mutual banking concept, this will help nurture a savings culture in South Africa. New technologies, together with tried-and-tested account features like chip-and-pin cards, will deliver real value to our customer,” he said.
The bank will feature the following:
- There will be no branches;
- To access cash, customers can use ATMs locally and internationally. Cash-out at major local retailers will also be available;
- All processes have been designed from the ground up with digital interaction in mind;
- All communication will be app-driven. Email communication will also be available;
- Customers can become shareholders, based on the type of savings products they have.
Jordaan said that Bank Zero has entered into a limited beta testing phase, with launch expected in the second half of the year.
The group has revealed more on how its accounts will work – including static credit card numbers, and integration with the National Payments System.
“Our name is a bit of a giveaway – Bank Zero. We do think that electronic transactions should be free. We would like to make all electronic transactions, and that includes card swipes, free,” Jordaan also hinted.
Beyond the question of fees and pricing, the group also wants to put a particular focus on small businesses.
“Bank Zero will provide businesses with a higher degree of protection from the all-too-common tragedy of being defrauded by unexpected criminals in their midst.
“This, plus lower banking fees, will provide much needed relief to the business and entrepreneurial segments of the economy,” it said.
Businesses will also enjoy seamless integration with Xero Accounting software, the bank said.
Bank Zero’s ‘cheque account’ will offer a modern take on the account, providing real-time checking and control of money.
“Being segment agnostic means no more upgrades from restrictive entry-level ‘bait’ accounts to more expensive ones. All Bank Zero customers will have access to all features. For example, detection of rogue debit orders as well as other unique advancements in payments technology will be offered free of charge to both individuals and businesses,” it said.
The bank’s 16-digit card number won’t need to change each time a card is replaced – so card details for digital services (such as Netflix or Uber) don’t have to be reset.
“Also, customers will be able to make QR payments via platforms such as Zapper or SnapScan, as well as mobile-based NFC payments,” the bank said.
Full public operations are expected to start in the second half of 2019.