Standard Bank says South Africa needs a new banking model

Africa’s largest bank by assets in July partnered with Pick n Pay to open branches within retail stores. The bank has started building in-store branches in Pick n Pay stores in the Western Cape and Gauteng. Discussions have started with “one or two” further retailers to expand the concept, Fuzile says.

Standard Bank and other incumbents in South Africa are seeking to improve distribution and lower the cost of their services in the face of increased competition from new entrants including Tyme Bank, Discovery Bank and Bank Zero. Tyme Bank agreed a partnership with Pick n Pay in 2019.

The Pick n Pay branches run according to the retailer’s trading hours rather than traditional banking times. They typically use two bankers and an area of six to 10 square metres within an open retail space. That represents a huge saving over full branches of between 100 and 300 square metres, Fuzile says.

• The bank’s customers have the option to use QR codes for payment in the Pick n Pay stores.
• The roll out will lead to a “far more cost-effective distribution network” and will take up to two years to complete, he says.
• “This is the future. Retailers have got space they don’t fully utilise. This will radically change our distribution strategy.”

Digital channels

The bank recovered strongly in the first half, with group headline earnings up 52% versus a year earlier. The rebound was led by South Africa, where earnings were almost three times higher than in the first half of 2020.

Digital strategy paved the way for the recovery, Fuzile says. The bank can now onboard individual customers by digital means for its low-cost MyMo accounts. The accounts, which cost 4.95 rand per month, rewards customers with free mobile data. ‘Know your customer’ processes are carried out digitally in minutes, and the bank now has more than 1mn MyMo accounts.

A further contributing factor was the bank’s decision not to “pull the handbrake” on lending during the pandemic.

• Lending criteria were not changed as a result of Covid-19, though some competitors slowed down in home loans. “We kept our doors open,” Fuzile says. “Home buyers came our way.”
• An enlarged sales force converted these borrowers to the bank’s advantage. Fuzile points to the decision to broaden previously specialised banking jobs through training to include selling and customer servicing.
• This, he says, increased the bank’s South African salesforce by about 3,000, and has helped to increase the number of active customers in South Africa to 9.7m.

Liberty

The bank in July offered to buy out the remaining shares in financial services and property holding company Liberty Holdings, in which it currently holds 54%, to achieve greater scale in insurance and asset management. The agreement still needs regulatory approval, and Fuzile says “the signs look good” that it will be secured.

Finalising the deal, he says, will allow the bank to escape the restrictions of its previous bancassurance accord with Liberty once the business is fully owned.

• The bank will be able to seek new partners for a range of financial services, he says. “We will be more flexible and less restrained.”
• As a separate business, Liberty also needs to hold more capital than will be required as a subsidiary of the bank, Fuzile says.
• When the buyout is concluded, capital will become available to invest in South Africa and possibly beyond, he adds.

Bottom line

Standard Bank is convinced that South Africa needs a new banking distribution model.