New South African bank taking on Capitec has a secret weapon

Old Mutual is set to convert its 400,000 active Money Account customers into clients for its new bank, named OM Bank, as part of its rollout strategy. 

OM Bank is set to launch to the public before the end of 2025 after it has met all regulatory requirements and is in a trial period with 600 Old Mutual employees. 

In March 2025, the Prudential Authority approved its banking licence and approved the appointment of its chief executive and board of directors. 

The insurer has spent R2.8 billion since 2022 building out the bank and securing the retail banking licence. 

This is not the only cost the insurer will have to absorb. It anticipates an annual loss run rate of between R1.1 billion and R1.3 billion. 

It assured investors that this would reduce over time as revenue was generated, with the bank expected to reach breakeven in 2028. 

“Our next key milestones include a phased approach to customer acquisition, integrating the Old Mutual Rewards Programme and positioning OM Bank to reach breakeven in the medium term,” it said.

Crucially, the bank has a secret weapon. Old Mutual already has an extensive ‘banking’ offering in the form of its Money Account, which Bidvest Bank currently administers. 

The next phase of the bank’s launch, after a trial period with 600 employees, is to open the offering to its existing 400,000 Money Account users and move its R16 billion lending book to the bank. 

In an opinion piece in the Financial Mail, outgoing Old Mutual CEO Iain Williamson explained that converting these active clients is a key focus for the bank. 

Williamson said the insurer will launch an extensive campaign to convert as many of its profitable Money Account transactional business’s 1 million customers, of which 400,000 are active customers, into bank clients.

Following this, the bank will look to tap into Old Mutual’s Mass and Foundation Cluster as a relatively easy way to win over clients to the bank. 

This cluster comprises the middle mass market, consisting of South Africans earning between R5,000 and R80,000 per month, a sector long dominated by Capitec. 

One-stop shop 

The launch of its own bank is part of Old Mutual’s ambition to become an integrated financial services provider, following the tried-and-tested ‘bancassurance’ model popular in South Africa. 

Williamson described the bank as the final piece of the integrated financial services puzzle, creating a one-stop shop of solutions. 

“As a company, we have pinned our colours to the mast of integrated financial services. This means we show up as a one-stop shop with a wide range of solutions,” Williamson said. 

“After five years at the helm, I am incredibly pleased that these solutions are largely in place. When I take early retirement in August, the wheels will be in motion for this model to be humming and unlocking long-term value.” 

Part and parcel of this integrated financial services plan is also the launch of Old Mutual Connect, the insurer’s own Mobile Virtual Network Operator (MVNO). 

Crucially, the launch of a banking app will enable Old Mutual to cross-sell its existing insurance products to new clients. 

Traditional insurance apps, although costly to set up, are used significantly less by clients than banking apps, rendering them ineffective platforms for cross-selling products.

Some analysts have suggested that this is the primary reason for Old Mutual to launch a bank, viewing it as a defensive move to protect its insurance business rather than competing with South Africa’s largest banks. 

Capitec has significantly expanded its presence in the funeral insurance sector, increasing its share of new funeral insurance sales to 36%, a market share previously held by Old Mutual. 

The bank has done this by being able to cross-sell its insurance products to its 23 million banking clients through its app. 

Matthew Pouncett, portfolio manager at Laurium Capital, explained that OM Bank would significantly improve Old Mutual’s distribution channels for its insurance products. 

Thus, the primary function of the bank would be to cross-sell its insurance products to a new client base and ensure it is easier for clients to engage with its products. 

It will also give Old Mutual access to vital transactional data on its clients, enabling it to offer products better suited to its customer base and personalise its offerings.

“The market is yet to see what the full offering entails, but many speculate the launch is largely a defensive move aimed at protecting Old Mutual’s lucrative funeral insurance business,” Pouncett said.