South Africa’s first entirely online bank has had a storming start, writes David Shapshak
For a bank without any branches, new online banking service 20twenty has ironically garnered a lot of brand and consumer awareness.
This is due in no small part to its high-profile outdoor advertising campaign, which featured a quote from Microsoft chief Bill Gates as a prominent pay-off line that “banking is necessary, banks are not”.
The market newcomer burst on to the South African banking scene three months ago, promising greater ease of use and a more personalised banking experience.
CEO Christo Davel is understandably pleased with 20twenty’s progress, as is Johan Myburgh, the group CEO of Saambou, which owns 65% of the online bank.
Both men point to how powerful the extensive outdoor advertising campaign was. Johannesburg was inundated with 20twenty’s distinctive orange colour and controversial pay-off lines.
This gave 20twenty an “alternative to the branch”, says Myburgh. “You drive past it every day and see it.” How often, he adds, do you drive past your bank’s branch and see its branding.
But while 20twenty has done an admirable branding exercise, it has also convinced more than 24 000 users to sign up since the launch at the end of July, much more than their initial projections of 9 000 by September.
“One of the challenges we have is to make banking more convenient for customers. We’re looking at cheaper and better ways to achieve that and it is one of the areas where technology is assisting us,” says Myburgh.
Technology is key to the initiative, which launched at the end of July and is entirely Internet based. Credit checks on new accounts are done while completing other sections of the questionnaire and, as an incentive to get new users to migrate from their existing bank, 20twenty will move all their stop orders and online beneficiary payments across.
Two of the features it hopes will set 20twenty apart are the Budget Planner, a kind of Quicken-like financial management package, and the Life Book, an online repository of all your vital information. These are in testing and will roll out in the near future.
While 20twenty has no branches per se, you can step into any Saambou branch if you need to deposit a cheque. Alternatively, for a R20 fee, it can be collected from you by a courier or a cheque can be made up for you and delivered. Users can choose a flat R50 a month fee, which includes four free ATM transactions, or a R5 a transaction option.
But 20twenty is far from being a new bank itself. It is a new banking initiative being done by an existing bank, says Davel.
Setting up the infrastructure and technology have been critical, he says, but it has an advantage over other banks in that it doesn’t have to make its system work with legacy systems.
Secondly, says Myburgh, it doesn’t want to steal its own customers. Analysts point out that as Internet banking is clearly a cheaper, it undercuts the investment in bricks and mortar branches.
“We don’t want to reduce cost to customer too much because then we will have a problem.
“We are attracting new customers to Saambou but don’t want to cannibalise our own customer base to use a cheaper route,” Myburgh says.
Davel adds: “People are responding to the ease of paying beneficiaries. We have focused on the ease and service given to customers.”
However, Davel’s bullish optimism isn’t borne out by everyone. While analysts say it might be going too far to say retail banking is in a state of flux, they agree that Internet banking is on the rise. It is certainly a channel that all banking groups have been pushing strongly and it is a cheaper channel for clients to do their business through.
“I think over the years ATM turnovers would have increased, while bricks and mortar would have dropped. In the same way I would expect that the Internet is increasing,” says Leon van Heerden, an investment banker with BOE Merchant Bank. “Flux is maybe a strong word, but there is movement.”
But, as an analyst from Barnard Jacobs Mellett (BJM) says, Internet banking is not necessarily becoming more dominant. “I think after all the hype, there is an increasing realisation that, apart from a few cases, Internet banking will only work as part of an integrated multi-channel strategy,” the analyst said, asking not to be named.
Van Heerden adds that “one could argue that in time, as the ATMs have proved, the computer turnover will continue to increase. At the moment these Internet banking models tend to appeal to a limited market, which must have access to a computer or at least an Internet caf. So within the broad context of South Africa, it is a very limited market, albeit the market with greater buying power.”
However, he does see 20twenty challenging the status quo, as it is “directed at a very broad cross section of the market and anyone can open an account”.
There is merit in their one-account-fits-all approach, say both analysts; while these accounts are offered by Investec and Origin.
“It is more convenient to have in one account a savings account, credit-card account and transaction account. If you are in credit then you get interest. It is very convenient and they offer competitive rates,” says Van Heerden. Davel says it is offering very competitive interest rates of either 6% on a balance of anything below R10 000, and 9% on anything above it.
20Twenty is clearly aimed at a younger, more Net-savvy market the “typically, sophisticated [literate] younger consumer”, says BJM’s analyst and is packaged accordingly. The on-screen graphics are simple but effective, and some of the best I’ve seen. The bank has an “animated dashboard of affairs” with a graphic balance sheet. The credit card arrives in a translucent plastic dome inside an orange box.
However, is there a danger for traditional banks either avoiding the online market or eroding their own bricks and mortar branches?
“Naturally one would say ‘yes’, but it could be argued that technology will drive specialisation and not every intermediary may find it necessary to go ‘balls to the wall’ on an Internet strategy [getting back to the issue of real commercial rationale],” says BJM’s analyst.
“Maybe one day there will come a time when we don’t need branches, but this is a long way off in my view. What is important is that banks have a thorough understanding of the costs involved in maintaining each channel, charge accordingly and manage the transition of customers to technology channels without a loss of service.”
He says that Internet banking is the way of the future, for a certain segment of the market with access to computers and the technological literacy to use them.
“While shopping may be a ‘recreational pastime’, I don’t think many people see banking in the same light and hence it is largely about convenience and price,” says BJM’s analyst.
Says Myburgh of 20twenty’s new customers and the word-of-mouth advertising Davel believes is aiding uptake: “Once they tasted convenience, other people are switching.”
20twenty’s launch follows on a significant tie-up for the poster child of online banking, the United Kingdom-based Egg, with Microsoft’s European Web portal. The deal will give the financial services company, which was floated by Prudential in June last year, a springboard into western Europe. MSN’s European websites receive about 42-million unique visitors each month.
Egg’s CEO Paul Gratton said the company is planning a pilot scheme in the UK that will be launched towards the end of the year. A full service for UK visitors to MSN will be launched next year. Beyond that, Gratton said Egg would start to offer financial services across mainland Europe.
In South Africa all the major banking groups have refreshed their online offerings. Nedbank and Standard Bank introduced new interfaces this year, whileNedcor recently launched a youth banking site called Serious (www.serious.co.za), which features the country’s first “virtual teller”.
Developed by design shop Delapse, the teller is a Shockwave-driven feature that interacts with the youth market the site is aimed at. It will talk you through some of the sections and verbalise any text you give it.
For 20twenty, says Davel, the “challenge is to maintain the take-up rate as it as at the moment. [Customers] are definitely ready for consumer orientated banking service. It was critical to break out of that mould and think differently so we can give the customer a different feel.”
In the meantime, are 20twenty giving other banks a run for their money? “I’m not so sure,” says Myburgh, “we certainly have them worried. After a year we can look back and answer that question.”