Bank Zero aims at high business banking costs

Banker-turned-venture capitalist Michael Jordaan has vowed that his newest creation, Bank Zero, will compete fiercely in the business banking space.

“We have made it clear we want to attack banking fees,” he told Business Day in an interview. “But not everyone has latched on to the fact that we are going to be attacking high business bank fees, especially the exceptionally high card transaction and electronic banking fees companies incur.”

Bank Zero has been integrated into SA’s national payments system, allowing it to compete on “an equal footing with the big guys”, he says. The bank, which has started trial runs for staff, plans to launch in mid-2019.

Bank Zero is one of four new banks expected to launch in SA. The others are TymeDigital, for which Patrice Motsepe’s African Rainbow Capital Investments has made a takeover offer; Discovery Bank; and the Post Office’s Postbank.

Jordaan, who stepped down as FNB CEO at the end of 2013, said the degree to which operating systems for virtually any sort of business could be accessed for free through open-source software had lowered the cost of launching the bank.

“To buy a whole mainframe and system was such an expensive undertaking a few years ago, but now you can access software and systems that are well designed, secure and reliable, virtually for free. And that is why the IT spend of Bank Zero works out to approximately 1% of 1% of what it cost to run an IT system when I was CEO of a bank. This allows us to charge lower fees and survive on smaller margins.”

Jordaan says there will be 14 features in the bank’s offering that will be new to the market, but for now he is staying mum on what it comprises.

Despite the failing of VBS Mutual Bank, Jordaan says he remains satisfied the mutual bank structure is the correct one from which to launch Bank Zero. “VBS is a disaster, but management were corrupt, and both the internal and external audits failed, as well as the bank’s compliance department and board oversight. So it is not the mutual bank structure that has failed. But if anything, it will make people pause to think where they invest their money.

“We are not going to be lending, just offering savings products and transactional banking, so a very simple and low-risk model, which may even benefit from a move to safer deposits.”