By Chris Gilmour
Two of the most important assets in African Rainbow Capital’s (ARC’s) portfolio are internet service provider Rain and TymeBank, the financial services company that recently celebrated its millionth customer in less than a year. Both are disrupting the status quo in their industries, Rain in telecoms and Tyme in banking.
ARC co-CEO Johan van Zyl says: “ARC has a definite bias towards financial services companies in its portfolio. Financial inclusion is essential in SA, it is a key part of having a winning nation. SA has a worldclass financial services industry but it is expensive. We’ve backed a few horses [at ARC] and we’re feeding them well and we think we have a winner in TymeBank”.
With such rapid growth in TymeBank’s customer base, the existing legacy banks, such as Absa, FNB, Nedbank and Standard are right to be worried. So much so that many of them are cutting their banking charges, hoping this will be enough to persuade their existing customers to stay.
WE’VE BACKED A FEW HORSES [AT ARC] AND WE’RE FEEDING THEM WELL AND WE THINK WE HAVE A WINNER IN TYMEBANK
But there is a limit to how much the legacy banks can do, saddled as they are with bloated infrastructures and often outdated technology. As Citibank analyst Charles Russell says, “It’s difficult to put a digital skin on a legacy bank”. He notes that challenger banks such as Tyme invariably start off in the payments space but the tipping point comes when savings and loans arrive.
In its report, “Bank X: The New New Banks”, Citi notes: “Legacy banks often have data that is stuck in multiple silos supported by core banking technology that was literally built in the era of black and white television. Manual intervention is high, which slows down operating speed, reduces flexibility, increases costs, and ultimately degrades efficiency and experience.”
In SA, the main problem with legacy banks is the extremely high cost of transacting. Service levels are high but their cost levels are often far too high for poorer customers to even consider. It is in this area that the new, disruptive banks such as Capitec and Tyme are finding great resonance. In the rest of the world, poor service levels tend to be the main reason for the emergence of new challenger banks, rather than cost per se.
Tyme’s advantages are seductively simple. Accounts can typically be opened in about five minutes and personalised cards can be accessed from kiosks at Pick n Pay and Boxer outlets easily and quickly. Total headcount at Tyme relating to new customer acquisition is 840 people, compared with tens of thousands of people in the legacy banks.
Two channels are used to bring new customers on board, online and via the kiosks, with kiosks accounting for 85% of new accounts. There are 14,000 till points at Pick n Pay and Boxer stores around the country, giving Tyme an immediate, wide footprint regarding points of presence. Tyme management is piloting with the Postnet infrastructure to increase its points of presence, as well as using mobile kiosks that can be moved from one location to another quickly and cheaply.
In 2020, Tyme aims to have the next stage of its development well under way, with its credit card launch, facial recognition on the Tyme app, foreign Fica (Financial Intelligence Centre Act) capability, term deposits and international money transfers. In the slightly longer term, Tyme wants to enter the fixed personal loan space, using Pick n Pay shopping basket data as a determinant in evaluating eligibility for loans. Eventually it hopes to be able to credit-assess customers for personal loans within two minutes.
Management believes that it can attract 3-million customers by 2022, by which time it should be profitable. If that goal is achieved, it will be no mean feat. Most comparable challenger banks in the rest of the world, such as Starling Bank in the UK, are still unprofitable, even after being in existence for five years or more.
MOST COMPARABLE CHALLENGER BANKS IN THE REST OF THE WORLD, SUCH AS STARLING BANK IN THE UK, ARE STILL UNPROFITABLE