Bank Zero offers to cut costs of business banking clients
Bank Zero, the challenger bank backed by former FNB CEO Michael Jordaan, is setting its sights on attracting more business banking clients by offering them lower transactional fees that can save them at least a thousand rand a month.
Jordaan says Bank Zero wants to make a difference to fee-weary SA customers by positioning itself as a low-cost transactional banking platform, particularly for small to medium-sized businesses (SMEs). That is based on a belief that business customers, like their retail counterparts, are typically overcharged for transactional financial services by amounts that Jordaan says are likely run into “billions and billions” of rand each year.
“The sweet spot is businesses with 10 to 15 employees, but we also want to go bigger to serve midcorporates — that’s exactly who we want to attract,” Jordaan said in an interview. “The average business that switches over to us can save at least R1,000 a month on banking fees.”
While targeting business banking puts Bank Zero on a collision course with the established business banking units of SA’s traditional lenders as well as newer entrants such as Capitec, TymeBank and African Bank, which are targeting SME banking, Jordaan does not plan on following them into credit extension. He believes the SA market is already well served by more than 40 lenders in a highly competitive local environment.
“We don’t see ourselves as a lending bank,” he says. “We’re focused on transactional banking — we want to make it as lowcost as possible. As a start-up, you have to focus and we’re laser focused on low-cost banking fees.”
Jordaan declines to reveal the size of Bank Zero’s present customer base but says it is likely to break even at 100,000 customers, a threshold it plans to reach in the next year or two. However, he does say more than one in 10 Bank Zero customers are business clients.
“Our first goal is to break even,” says Jordaan. “That could happen in the next year — the next 12 to 24 months would be the timeline.”
In keeping with the focus on rolling out lower-cost transactional capabilities for business clients, Bank Zero is also planning to move into foreign exchange and international banking services.
“We don’t do forex yet but we’re looking into it because that’s another area where fees are very high,” says Jordaan.
Bank Zero is set to announce a new partnership with what Jordaan describes as an “upand-coming fintech” platform in the next month, but he declined to reveal more. The partnership is premised on a belief that financial services will eventually evolve into a collaborative, symbiotic environment rather than one characterised by single institutions trying to be all things for all clients.
“We believe that instead of one full-service bank you will in future have an ecosystem of financial services providers.”
Bank Zero also wants to help make life easier for business clients by making the process of opening a business account simpler and less paper-intensive. To do that, it will have to further enhance its array of digital capabilities.
But with its team of active shareholders, none of whom have yet drawn salaries, since Bank Zero went public in August 2021, will the challenger firm be looking to raise further capital, perhaps from an institutional investor?
Jordaan says this can happen only if a like-minded partner can be found who shares Bank Zero’s vision of low-cost transactional capabilities.
“There’s no use bringing in an institutional investor who suddenly wants us to charge higher fees for electronic transfers,” he says. “But we may at some stage go out and raise some institutional capital. We’re not in a hurry to raise capital but … maybe in the next 12 to 24 months.”