The former CEO of First National Bank (FNB), Michael Jordaan, is launching a new app-driven bank early next year. He says Bank Zero will not inflict exorbitant fees on consumers.
“It is possible to create a mobile bank at a much lower cost than the traditional banks… If we can stimulate a savings culture in South Africa, as well as help individuals and businesses to waste less money on bank fees, it will help the economy grow,” he says.
Jordaan has worked in the banking sector for over 20 years and will need all his experience as he becomes a competitor of his former employers.
The idea came about three years ago, over a good bottle of wine with his co-founder Yatin Narsai, who is the former head of retail at FNB. The two were inspired by the app-driven businesses such as Uber and Airbnb.
“We hope to solve many of the everyday problems that individuals and businesses still have when making payments or investments,” says Jordaan.
They spent the last year applying for a banking licence with the South African Reserve Bank (SARB). This year, they are working on integrating the bank into the South African payments system.
In 2014, Jordaan launched MonteGray Capital to invest in disruptive start-ups. Now, his own business is set to shake up the banking industry.
“It has been an incredible privilege to start with a blank sheet of paper and develop a bank from first principles. We will have no legacy technology and no reliance on income streams that should not exist, like electronic banking fees. The functionality of the app will be far richer than any bank we have seen locally or abroad,” he says.
Though, like most banks, Bank Zero will have an app and a card, it will not have a branch.
“Branches are old-fashioned. If you could design a bank from scratch you would never think of doing it around paper and bricks and mortar. Just like WhatsApp and Facebook don’t have branches, the bank of the future will be mobile…” he says.
In addition to South Africa’s big four banks – FNB, Standard Bank, Absa and Nedbank – Adrian Gore’s Discovery is launching a bank later this year. Is there room in South Africa for another bank?
“South Africa has 33 banks and the sector is highly sophisticated and competitive. The fact that [South Africa’s] bank fees are high in international comparative terms means that there is still a lot of room to lift the competitive intensity,” says Jordaan.
To differentiate itself, Bank Zero will only cater to those with smartphones and tablets.
Jordaan is intent on making his bank technologically innovative. He learned this lesson the hard way when he was chairman of Mxit. The messaging app was blown out of the water by WhatsApp and Facebook Messenger.
“It is a powerful lesson why businesses must build for the future rather than hang on to the past. That is why Bank Zero will be built for smartphones and tablets, rather than for dumb phones.
“In a few years the only phones that will be sold will be smartphones. Today there are entry-level smartphones available for less than $40 but this could still halve in three years,” he says.
If Jordaan had his way, in the near future, brick-and-mortar banks will be as redundant as those dumb phones.