Cape Town – Michael Jordaan who co-founded app-only bank, Bank Zero spoke to Fin24 on his hopes for the new offering, which he expects to “revolutionise” the banking sector in the same way the discovery of the number zero changed mathematics.
Earlier on Tuesday Jordaan tweeted about the new bank which is set to launch in the fourth quarter of 2018. The bank had been granted a provisional licence by the South African Reserve Bank.
Jordaan, who is the chairperson, co-founded the bank with seven others with experience in the banking sector and who have a passion for technology, he said. The team includes banking innovator and CEO Yatin Narsai. It is a mutual bank, which is 45% black-owned.
In a telephonic interview with Fin24 on Tuesday afternoon he shared more on the offering
Fin24: What was the gap you identified in the market that led to the development of Bank Zero?
Jordaan: The opportunity that we [the founders] saw is that there are many things we can do in banking if you have the privilege of starting with a clean slate. So we really are looking at what technology enables and then applying it to deliver benefits to the customers.
Technology allows you to start an institution at a much lower cost. There is an incredible amount of business for technology available today and everything is built for mobile – it is mobile first. This is very different to when you come from a large bank, where you have a whole number of channels and a huge amount of products and the complexity and cost structures that come with that.
The opportunity we see is to start an app-only bank, in other words do all banking from a mobile phone. Much in the same way as would use WhatsApp instead of SMS. We think the future of banking will be mobile. Obviously, there will be a card as well because people want access to cash.
It is a transactional bank, an app-based bank supported by card. It will provide a great user experience, it will give customers more control over finances, there will be more transparency. We certainly hope to come with very competitive fees and very competitive deposit rates.
Will there be any physical bank branches?
We are certainly going to avoid bricks and mortar because that adds to cost structure. Thinking of designing banking 2.0 or a modern type of bank, you certainly would not start with branches
We do want to interact with our customers so the app will have a chat feature or they can email us. There will be the ability to get human help. But you won’t have to drive somewhere, park the car or stand in a queue. It will all be done via the app.
Would the chat feature work like chatbots?
The intention is not to use Chatbots, as we want the experience to be so smooth that it won’t even be necessary to talk to us. But clearly if customers do, it is a learning experience for us and an opportunity to make the app better.
Who knows where technology will take us over time? We do recognise that something like Chatbots is big for business, but that is not what we intend to do before the end of this year.
How long has the bank been in development?
The actual application to the Reserve Bank started at the beginning of last year. It was a long, rigorous and in-depth process. We have to pay respects to them for the professional manner in which it was done.
They really took us through all the hoops, from management being prudent to the technology processes complying with the latest legislation. We are very proud that at the end of the rigorous process they did award us this provisional licence.
What is next for us to do is to integrate with various payment systems in SA. It is actually a very complex endeavour and will take us the rest of this year, which is why we are targeting a public launch in the fourth quarter of 2018.
Is the banking model adopted from existing models around the world?
It is clear there is a trend of mobile banking and app-based banking in the rest of the world. It is also clear that there are features that app-based banks that is somewhat different for existing banks.
The real inspiration has not come from foreign models, it has come from experience in the team and doing things we know customers in SA would want. That relates to being more competitive on fees and interest rates, and the actual user experience they will have on the apps.
It is a team that knows their stuff, on top of their banking game and taking those insights and translating it to something which will hopefully be exciting for customers.
What makes Bank Zero different from existing offerings?
Clearly more will be revealed when we launch. We are not yet ready for launch and we do not want competitors to know exactly what we will be doing. We can say it is the user experience, prices, rates and functions not available in the banking industry today.
Everything will be electronic – everything from signing up as a customer to doing things that normally need signatures and paper work, and so forth. We are not going to reveal everything just yet.
We have lots of ideas post 2018, but we are focused on the launch. The market segments being targeted is anyone adept at using a smartphone. That could be the youth or those using smartphones for business.
We are interested in the business segments, which we believe pay higher fees than individual customers. That is an arbitrage we are hoping to attack and to bring some relief to the business sector.
Were the data requirements of this offering considered?
Incidentally, I am involved in Rain (a data focused mobile operator) which is focused on making data faster and more competitive in SA. It is due to launch really soon.
What is clear in SA is data usage is growing astronomically. Prices have indeed come down and are coming down even more. If it (data) is an issue we will consider zero-rating the app. But at the same time we are developing the app in such a manner that data consumption will not be big.
We are not concerned that data consumption will make the overall banking proposition uncompetitive.
What is the structure of Bank Zero?
The shareholders right now are the seven co-founders of the business, which are the employees and to a smaller degree the directors. Only individuals are involved, there is no big institution behind us.
That means that team has skin in the game – which we think is a very important business prospect.
It also means we are able to build something for the long term, something we think we would like as customers.
Bank Zero is also different in that it is a mutual bank, we want to pass on as many benefits as we can to customers. Not only by making the product more competitive, but also allowing the depositors of Bank Zero to actually become shareholders in the banking institution. That in itself is quite an innovation which we haven’t seen in the SA market.
What’s the story behind the name?
It was actually inspired by mathematics. When it came to invention in numbers clearly numbers like one, two, three, four were invented first and something like zero only came later. But when it did, it changed mathematics altogether.
We felt the same applied to us in SA. We certainly are not the first bank and not the first mobile bank but we do hope that we are able to revolutionise banking in SA. That is where we derive our inspiration from.
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