Banking

South Africa getting four new banks

South Africa is set to get as many as four new banks in 2025, ranging from a fully-fledged commercial bank to mutual banks and cooperatives. 

The country’s banking landscape has changed markedly in the past few years, with the launch of new ‘challenger banks’ like Tyme Bank, Discovery Bank, and Bank Zero. 

These banks have gone toe-to-toe with the country’s traditional ‘Big Five’ of Absa, Standard Bank, Nedbank, FirstRand, and Capitec. 

Tyme Bank and Discovery Bank have been particularly successful, rapidly growing clients and deposits to become established players in the field. 

Patrice Motsepe-backed Tyme Bank is now valued at $1.5 billion (R27.7 billion) and serves over 15 million clients across South Africa and the Phillippines. 

Discovery Bank has also grown strongly, hitting one million clients five years after launch. While not profitable, it aims to double its client base and generate R3 billion in profits by 2029. 

Crucially, Discovery has invested heavily in its bank to make it the country’s first full-service digital bank, offering a complete suite of retail products. 

While Tyme Bank and Discovery have focused on expanding into South Africa’s retail banking market, some traditional banks have entered business banking for growth. 

Chief among these has been Capitec, whose purchase of Mercantile Business Bank in 2019 gave it a foothold in the sector. 

African Bank has also moved into this space through its purchase of Grindrod Bank for R1.5 billion in 2022. 

However, the purchase of two smaller banks by their larger peers also symbolises a shifting market, with scale becoming key to survival and profitability. 

Smaller banks with specific niches have been unable to flourish in South Africa, and the compliance burden has grown to the point that scale has become imperative. 

This can also be seen in the sale of Bidvest Bank to Access Bank for R2.8 billion at the end of 2024. 

South Africa’s banking sector already has 29 players, and four more are set to join in the coming year. 


Old Mutual 

Initially expected to launch at the end of 2024, Old Mutual is now set to launch its banking challenger in early 2025. 

The insurer has spent the past two years building its banking systems and fulfilling regulatory requirements to launch what has been referred to as OM Bank. 

At the end of April 2024, it received Section 17 approval to establish a bank, enabling the company to begin testing its processes and capabilities with selected partners before integrating into the National Payments System.

CEO Iain Williamson said the bank would be highly digital but also complemented by Old Mutual’s extensive physical branch network. 

“We have had a team building the digital infrastructure of the bank for the past two and a half years. That is now all finished.”

“So, we have all the infrastructure required to run and support the bank from a technology perspective, all the call centre technology, and core banking systems.” 

“What we need to finish up is to conclude the constitution of the board to oversee the bank and the executive team to run the bank that regulators are comfortable with, given our history as a non-banking financial institution.” 

Once that is completed, the bank will be launched alongside a new app that has already been developed. “The intention is for that to be early in the new year,” Williamson said. 

Given its extensive banking operations, he described it as a “no-brainer” for Old Mutual to launch a bank. 

“Our unsecured lending book is sitting at R16 billion. We have about 400,000 active transactional account users in our transactional banking solution, which we do under Bidvest,” he said. 

Old Mutual also offers a home loan product with SA Home Loans. “We have a lot of the components of banking. We have not brought those things together in one cohesive entity yet.”


YWBN Mutual Bank

The Young Women in Business Network (YWBN) received its mutual banking licence at the beginning of 2024, with the Prudential Authority gazetting its registration in January last year. 

It said at the time that it would spend 2024 using this licence to complete its bank build and launch sometime in 2025 or later. 

First announced back in 2018, YWBN operated as a cooperative financial institution (CFI) at the time. 

It will convert its operations from a CFI – which can only offer services to its members – to a full-fledged mutual bank.

YWBN is the first CFI to successfully apply for and receive a mutual banking licence in South Africa. 

Mutual banks are different from commercial banks. They are ultimately owned by their depositors, who become shareholders in the bank and have input in its decisions through general meetings. 

These banks tend to be more conservative in their investing and lending operations, usually more focused on saving. They are restricted by law in what products they can offer clients. 

There are a small number of mutual banks in the country, including Bank Zero Mutual Bank, Finbond Mutual Bank, and the GBS Mutual Bank. 

YWBN is set to become the first women-owned bank in South Africa and focus on offering small businesses savings and loans. It will also focus on unbanked South Africans. 

Despite being relatively young, the bank is already undergoing a name change to Nthabeleng Likotsi Mutual Bank (NL Mutual Bank) after its founder, Nthabeleng Likotsi. 

This name change is subject to approval by the Prudential Authority. 


Postbank

The Postbank has been operational in South Africa for several years under the South African Post Office but has only recently overcome hurdles to becoming a fully-fledged commercial bank. 

Instead of building a new bank from scratch, the government plans to turn the Postbank into a fully operational state-owned bank separate from the Post Office. 

President Ramaphosa signed the Postbank Amendment Bill into law in September last year, formally transferring the Postbank’s shareholding from the embattled South African Post Office to the government. 

In March 2024, the president also enacted the South African Postbank Amendment Act, which officially transferred the company’s shareholding from the Post Office to the government. 

Late last year, Finance Minister Enoch Godongwana said strong progress had been made in creating a state bank and that the Postbank is central to this aim. 

Godongwana explained that the Postbank Amendment Act enables the establishment of a Bank Controlling Company, the new holding entity for a bank.

It paves the way for Postbank to evolve into a fully-fledged state-owned banking operation in the country.

While Postbank has always offered minor banking services through the Post Office, it was strictly a savings subsidiary, unable to offer transactional accounts, credit, and other banking services.

With legislation in place, it can apply for a new banking licence from the Reserve Bank’s Prudential Authority. 

Postbank has previously said it will resubmit its Section 16 application for the current financial year, but no set date has been given for its launch.

Godongwana said they will do whatever they can, within the legislative framework, to improve access to credit for small and medium enterprises.

He added that the government should help to introduce more competition to the South African banking sector.

“Institutions like the Postbank will be critical in the competitive environment,” Godongwana said.

The minister added that progress is being made to ensure that the licensing of the state bank is achieved.

“We are in discussions with the Department of Communications and Digital Technologies regarding appropriate funding for Postbank.”


South Africa Innovative Financial Services Cooperative

Minister of Women, Youth and Persons with Disabilities

The Department of Women, Youth and Persons with Disabilities announced earlier in 2024 that it plans to launch a new cooperative bank in South Africa. 

This bank, under the proposed name of South Africa Innovative Financial Services Cooperative (SAIFSC), has not received any banking licence as yet and will be more akin to a formalised stokvel until it does. 

While it initially planned to launch to the public in July 2024, it missed this window, and little clarity has been given regarding when the bank will begin commercial operations. 

In August 2024, the DWYPD said the Prudential Authority and Financial Sector Conduct Authority (FSCA) had asked it to provide additional documents to finalise its application to become a cooperative bank. 

The department’s latest implementation plan for the bank extends until 2025, indicating a possible launch this year depending on approvals from the Prudential Authority. 

At the end of the last financial year, the bank reported having 461 members and a bank balance of R279,000, which it admitted is low. 

Since then, this has grown marginally to a share capital of R298,000 and 491 members.

However, the department insisted that with a “limitless” potential, it will undergo an extensive recruitment process to attract more members when it gets its licence and launches the bank.

Newsletter

Top JSE indices

1D
1M
6M
1Y
5Y
MAX
 
 
 
 
 
 
 
 
 
 
 
 

Comments