OPINION

  • Bank Zero announced the delay of its launch amid recent poor confidence data. It now has no solid timeframe for launch.
  • Fellow newcomer TymeBank is gaining customers, but there are questions on whether it can make money.
  • Discovery Bank too has interested customers – but has yet to prove that people will trust it with their salaries. 
  • For more stories go to www.businessinsider.co.za.

The last of three disruptors to announce plans in recent months to compete in the increasingly crowded retail banking market is quietly delaying its launch, as faster movers grapple with how to make money in a soft economy.

Bank Zero, a start-up by mostly former First National Bank (FNB) staffers chaired by venture capitalist Michael Jordaan had planned to launch this month, but it’s pushed out that launch, probably to next year.

There is no new time frame at this stage.

“We will communicate the latest in a few weeks. A big milestone is coming up for us,” said Bank Zero CEO Yatin Narsai.

“Progress is solid but I'm very reluctant to do a soft launch as this adds lots of complexity. Our focus is to get the full value proposition.”

Bank Zero is furiously testing systems and Narsai says his team remains “extremely focused”.

The reality is starting any new business is hard. That’s all the more true in the current SA environment.

Read also: 'Hello world': Discovery says it accidentally sent a message to clients out of excitement

TymeBank, which recently replaced its CEO and bolstered its board with former Nedbank executives including ex CEO Tom Boardman as its deputy chairperson, is growing rapidly. It has 740,000 accounts, but fewer than half are deemed active.

Nearly half its active customers are over 35, which is not something it expected when it launched. Its offering, in partnership with Pick n Pay, appears to be gaining traction as it ties into the Smart Shopper scheme.

It has not, however, disclosed its financial position.

The sustainability of these new banking startups will lie in their ability to make money. The market is awash with speculation about Tyme’s cash burn-rate and just how tolerant its parent African Rainbow Capital (ARC) can afford to be as it evolves from a single-product, low-cost transactional bank to offering higher margin products. The bank says it has been tasked with achieving break-even by 2022.

“We would like to pilot a simple and ultra-low-cost small business account this year, only to selected existing consumer customers,” says CEO Tauriq Keraan. It’s also now looking to microlending as a revenue stream.

Discovery Bank launched in June and at last count had 22,000 customers, with plans of signing up thousands more weekly. There again, deposit levels are fairly modest, suggesting most new customers are wary of fully committing to it until they have experimented with the platform.

Critical to the success of any bank is trust. Without it, customers will not deposit their salaries into their accounts regardless of the number of gimmicks, rewards, and incentives on offer.

Convincing customers to shift their primary transactional banking to a brand new player is hard and can take months as people run parallel accounts before either committing to the new operator or reverting to their existing provider.

News of the Bank Zero delay broke as business confidence data suggested a collapse in corporate confidence and raises questions about the viability of new players in a depressed economy.

Bruce Whitfield is a multi-platform award-winning financial journalist and broadcaster.

This article was updated to correct a reference to Tom Boardman, who is the deputy chairperson of Tyme Bank rather than the chairperson.

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