New African Bank out to compete in community banking space

I think a lot of banks have been trying to get [stokvels] right but haven’t really achieved it

● The new African Bank, which is piloting its transactional banking product, to be launched later this year, has built community banking into its account in an attempt to differentiate its offering from competitors.

The My World cheque account allows primary account holders to have as many pockets as they like attached to their accounts. Each pocket may have an unlimited amount of members included, giving other members full sight of the activity in the pocket as well as access to the funds.

The community banking concept did not target a particular group or community but, in line with the bank’s strategy to grow its affluent client base, aimed to reach a wide range of communities, CEO Basani Maluleke said.

“It will allow people that share a WhatsApp group to create an account and deposit money together. They can see who is depositing money and who is taking money out. So you have more of a community banking feel,” she said.

The concept of club accounts are not new. Most established banks have savings products targeted at stokvels, burial societies and other groups of people with common goals.

But African Bank’s My World account will be “near free”. The account’s activity, along with the activity in all of its pockets, will be managed through the bank’s app or online by the multiple members.

“I think a lot of banks have been trying to get [stokvel or club accounts] right but haven’t really achieved it,” Maluleke said.

For groups of people in stokvels, where trust in management of funds has been an issue, the account allows limits on how much is drawn and what the money is used for.

Applicants will also be able to open accounts remotely. “You can literally do the whole thing in your pyjamas on the couch,” Maluleke added.

How unique African Bank’s community banking concept is and how it will stack up against what is already offered by competitors remains to be seen. Nedbank, for example, does not charge transaction fees on its Stokvel Account and offers account holders discounts on groceries and school supplies.

But the concept may offer African Bank access to a wider network of potential clients.

Although stokvel accounts did not represent a significant portion of the income of the established banks, these provided a service to communities and gave banks the ability to cross-sell products to the members of the group account, said Jan Meintjes, a portfolio manager at Denker Capital.

“There are informal groups of people that actually make good clients . . . If [African Bank] wants to bank those kinds of clients, there is a market there, although I am not sure how big it is,” he said.

In 2014 research company African Response estimated that there were 8.6 million stokvel members in the country.

Maluleke, who succeeded Brian Riley as CEO last month, will first focus her energies on the launch of My World. But another one of her priorities is finding a telecommunications company to tie up with, in order to offer clients the three pillars the bank will use to develop products — bank, insure and connect.

It has already partnered with Momentum to cross-sell products between the two companies. The joint venture had provided African Bank with access to a customer base that would not usually have considered it an option, Maluleke said.

African Bank’s strategy to team up with other companies, rather than build its own insurance and telecommunications businesses from the ground up, will give it “maximum impact” in reaching clients in a short space of time. This may prove crucial in an increasingly competitive financial services sector, with several new banks launching this year.

TymeDigital by Commonwealth Bank South Africa and Bank Zero will target lower-income earners. But Discovery Bank is set to enter the already highly concentrated affluent retail space, where African Bank also hopes to gain traction with clients.

To keep up with the pack, African Bank is investing heavily in IT systems and talent.

“As banks become more complex the pool of talent to draw from becomes smaller,” Maluleke said.

“What’s different for us is that the opportunity at African Bank is different. People come here and get to rebuild the bank. That challenge on its own is exciting and enough for people that want to come . . . But once people come we’ve got to keep them. So you’ve got to pay people well.”