From Sandton doctors to Soweto traders: FNB coming for South Africa’s forgotten business owners

South Africa is estimated to have 1.5 million formal ‘solopreneurs’ who run their own businesses or side hustles as sole proprietors, with millions more in the township economy. 

These individuals typically manage their business banking needs through their personal accounts with banks, receiving payments and settling accounts through a typical transaction account. 

FNB has gradually expanded its Solopreneur offering to serve these clients with basic business banking functions linked to their personal accounts. 

FNB private core banking head of product Mohamed Choonara told Daily Investor that the biggest challenge these individuals face is accepting payments. 

Choonara revealed that FNB’s private banking base has around 600,000 solopreneurs, ranging from doctors and lawyers to informal traders

These individuals typically use their personal banking accounts to run these businesses, with transaction data mimicking that of small to medium-sized enterprises (SMEs). 

Where they run into challenges is in receiving payments across multiple channels, such as cash, card transactions, and EFTs. 

This would typically require an individual to shift over to an expensive and cumbersome business banking product designed for SMEs with higher turnovers, employees, and multiple suppliers. 

FNB created its Solopreneur offering to specifically address the needs of these clients, giving personal banking clients access to merchant solutions at a low cost. 

“We will allow our merchant services solutions to settle into your personal account as long as you are a sole proprietor that tracks your business activity separate to personal activity for tax purposes,” Choonara said. 

“We see this behaviour, and we are comfortable with it. What we are doing is letting people know that we provide other capabilities so that as your business grows, you can use what we have.” 

These offerings are integrated within an individual’s existing FNB retail profile, unifying their finances on a single platform. 

FNB’s Solopreneur offering gives individuals access to a personal bank account, a credit card, a business account, and merchant payment solutions. 

The platform includes digital tools such as invoicing, accounting capabilities, tax submission support, digital payment acceptance, and eBucks rewards. 

As a result, it brings together personal and business banking, payments, merchant services, rewards, tax support, and advisory services into one ecosystem. 

This enables FNB to support clients earlier in their entrepreneurial journey and grow with them through credit, lending, investments, and insurance.

The informal economy play

The number of solopreneurs, as FNB calls them, is growing strongly in South Africa, with millions looking to supplement their income with a side hustle or start their own business amid rising unemployment. 

This is particularly true in the informal economy, which absorbs much of South Africa’s large unemployed population and supplements the income of millions more. 

Choonara explained that the offering was borne out of FNB’s data analysis showing that the number of freelancers, contractors, and entrepreneurs was growing faster than that of salary earners. 

As the South African economy slowed over the past 15 years and wage growth declined, individuals turned to small businesses to grow their income. 

“We estimate that now around 4.4 million South Africans earn a salary that they generate for themselves through their own businesses. It is remarkable,” Choonara said. 

“Of that 4.4 million, about 1.5 million of those are solopreneurs or businesses of one. They are the owner and the employee.” 

Choonara explained that these are just formal sector statistics, with the informal economy likely housing far more sole proprietors. 

These individuals are naturally more difficult to cater to as they often do not have a relationship with a bank and typically deal predominantly in cash. 

Choonara expects FNB’s Solopreneur offering to make some headway in the informal market, with the bank now opening up the product to South Africans who do not bank with it. 

“Most businesses are started informally as a business of one before they expand and hire employees to become an established company,” Choonara explained. 

“It is at this point that they use their personal banking account to run their business, which creates a host of challenges regarding the receipt of payments.” 

Choonara said the bank’s solopreneur client base is diverse, ranging from doctors, lawyers, and consultants to plumbers, electricians, and traders or vetkoek sellers on the side of the road.

To deepen its presence in the informal economy, FNB has created a cash bundle to provide business banking services to clients who predominantly deal in cash. 

This bundle enables individuals to formally bank that cash with a number of free deposits and withdrawals per month. 

“With this, I think we now have a solution for the low-end entrepreneurs, and we hope we can compete with it. We think there is enough there at that price point for an entry-level entrepreneur,” Choonara said.