DURBAN – The banking sector is poised for a major shake-up in competition this year as three new entrants begin plying their craft against the established institutions which have perennially dominated the market.
Discovery Bank, Bank Zero and Patrice Motsepe’s TymeBank are expected to give the likes of Nedbank, Standard Bank, Absa Bank, FirstRand and Capitec a run for their money after they were granted banking licences last year.
Jordan Weir, a trader at Citadel, said that with the emergence of the new banks into the sector, the consumer could expect to see a few more innovative products and services being added to the current suite of banking solutions and more competitive pricing models might be implemented across both old and new banking options.
“We can also expect to see further fine-tuning and innovation in terms of digitalisation and securitisation within the South African banking landscape to create a safer, more efficient and user-friendly banking experience."
He said that as Discovery Bank was further aligning clients’ health with banking benefits, South Africans could also expect to see banks in the near future going places they had never ventured before. Weir said this was good for competition in the industry.
End consumer
“The more competition there is, the more beneficial it will be for the end consumer. The introduction of new entrants into the banking space means that the pricing models and benefits currently linked to client banking solutions will become even more competitive and thus more rewarding for the end consumer. More competition also means a higher potential for a decrease in banking costs,” he said.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said Discovery Bank would no doubt compete with the likes of Investec, the private banks and the big four banks.
“I think Tyme Digital is directed at the younger, more tech-savvy consumers who are cost conscious and competition is always good for the consumer,” Nair said.
Ron Klipin, a senior analyst at Cratos Capital, said a new type of banking entity was emerging, focusing on lower-cost IT operation.
“This is likely to be branchless with the emphasis on internet and cell phone technology. Most South African conventional banking companies have already started to move in that direction. This has taken the format of downscaling branches in order to reduce costs and encourage customers to use technology and call centres,” Klipin said.
He added that these measures should enhance competition and reduce costs which hopefully would be passed on to their customer base.
“An example of this lower-cost operation is Capitec, which has made major strides in building up a major client base away from the more traditional banks. The new Discovery Bank and TymeBank operations have not yet fully disclosed the product profile that they will be offering to their client base,” Klipin said.