Old Mutual applies for a banking licence
Old Mutual has applied for a banking licence, in a move that will further shake up the banking industry, long dominated by four traditional players.
SA’S third-biggest insurer said the licence would serve as platform to drive greater interactions with its client base and cross sell its products. It would enable it to accept retail deposits, thereby providing a cheaper source of funding. OM already has lending and transactional solutions in SA, mainly money market accounts and an unsecured lending product delivered through an arrangement with a third-party bank. “While this arrangement has allowed us to gain experience in transactional services, a divergence W:22.841mm of aspiration requires us to reassess our arrangement,” Old Mutual said.
The company is targeting launching the new bank in the second half of 2024, subject to regulatory approvals from the Reserve Bank’s Prudential Authority, and is projected to break even three years after its launch.
The approved expenditure to complete the build of the transactional banking capability is R1.75bn, Old Mutual said.
“In line with the business case, we have incurred costs of R830m for the current period and approximately 10% of these costs were capitalised,” it said.
Competition in the retail banking space in particular has been fierce in recent years with the arrival of challenger banks such Discovery Bank, Tymebank and Bank Zero. Traditional players are Absa, Nedbank, Standard Bank and FNB.
Capitec Bank, the most successful retail bank by far, already provides insurance cover to its 18-million-plus clients, and in the process has taken market share from traditional insurers.