Fitch: Standard’s move well timed

Standard Bank’s imminent launch of mobile communication services “is well timed” but the lender will have to differentiate its offering to make it succeed, says Fitch Solutions.

Standard Bank’s imminent launch of mobile communication services “is well timed”, but the lender will have to differentiate its offering to make it succeed, says Fitch Solutions.

The bank has announced plans to become SA’s second financial institution to launch a mobile virtual network operator (MVNO) business. MVNO is a company that does not have its own mobile wireless cellphone network but piggybacks on existing network operators.

Frontrunner FNB already has more than 600,000 network subscribers after launching its MVNO in mid-2015. FNB Connect and other virtual operators such as Virgin Mobile, MRP Mobile and me&you mobile rent network capacity from Cell C.

As part of its plans to encourage competition in the telecommunications sector, the government is to establish a wholesale open-access network to give newcomers a leg up.

Standard Bank has not yet said which network it will use.

“We believe that Standard Bank’s MVNO move is well timed, particularly as mobile network operators have shown renewed interest in offering more advanced financial products and services,” Fitch Solutions said in a note.

The bank’s entrance into the market “highlights the growing convergence between telecoms services and retail banking in SA”, it said.

Banks had a good opportunity in the telecommunications market as traditional network operators had so far failed to penetrate the country’s advanced banking sector, the research house said, referring to the failure of Vodacom and MTN to build successful mobile money businesses in SA. Standard Bank had 8.1-million active customers in SA in June, which meant its mobile business had access to a “large potential mobile subscriber base”.

“In addition to strong brand recognition, Standard Bank can leverage its significant nationwide footprint by using its branches as point of sale locations for their mobile products.

“However, it will enter a crowded MVNO market, further squeezed by the fierce competition between the four mobile network operators.”

It would have to differentiate its offering, Fitch Solutions said.