End of an era for South Africa’s zero-fee bank

South Africa’s Competition Tribunal has unconditionally approved the merger between Lesaka Technologies and Zero Research, the owner of Bank Zero.

Lesaka is a fintech group that now has the competition watchdog’s approval to acquire Zero Research and a stake in its subsidiary, the South African digital bank, Bank Zero. 

Upon the transaction’s completion, Lesaka will directly control Zero Research and indirectly control Bank Zero.

The acquisition consideration will be settled through a combination of newly issued shares and up to R91 million in cash.

Lesaka provides financial technology products and services to underserved consumers and small businesses. In South Africa, it also provides low-cost financial services to underserved and unbanked customers, including insurance, micro-loans and payment processing. 

The group does not provide banking services as it does not hold the requisite banking licence. However, through African Bank, it offers customers a basic transactional account through its EasyPay Everywhere service.

Zero Research controls Bank Zero, which was founded in 2018 and is chaired by well-known South African businessman Michael Jordaan. 

Bank Zero offers its customers retail and commercial banking services, including transactional and cash investment accounts. 

The bank is also able to hold deposits on behalf of EPE customers, a feature directly relevant to its merger with Lesaka.

The transaction was first announced by Jordaan in a social media post, where he said that the leadership team of the bank will remain fully intact.

The bank was founded by Jordaan, banking innovator Yatin Narsai, and five other co-founders. It is 45% black-owned and 20% women-owned.

The bank’s main selling point is its innovative fee model, with an “only pay for what you use” promise. 

Bank Zero customers only pay for cash and chosen extras, and only when they use them, meaning clients do not end up cross-subsidising other customers.

It is also a fully digital bank, meaning it has no physical bank branches and clients only interact with the bank through its mobile app.

Bank Zero has recorded deposits of roughly R400 million. For the year ending December 2024, card spending totalled R415 million across its customer base.

“We’re now tracking ahead of plan with expected break-even by 2027. Our challenge is to try and get there much sooner,” it said.

The bank reported that deposits, card purchases, and electronic fund transfers are increasing continuously, with year-on-year growth exceeding 50%.