New South African bank to take on Capitec 

Old Mutual’s bank is set to be launched before the end of 2024, following a bank build of around two years. It will target the upper mass market and lower affluent consumers.

This was revealed in the insurer’s annual report for its financial results for its 2023 financial year, where it produced strong results. 

In a media briefing following the release of the company’s results, Old Mutual CEO Iain Williamson provided an update on the company’s plans to launch a bank. 

The South African Reserve Bank’s Prudential Authority approved the company’s application for a banking licence in November 2022. 

The group already has existing lending and transactional solutions – an unsecured lending product and the Old Mutual Money Account – with the latter handled through a partnership with Bidvest Bank.

Old Mutual said that the unsecured lending solution, in particular, is already a strong contributor to group profitability.

“Establishing a bank within the group will allow us to maintain a primary relationship with our customers, driving greater regular interaction with them and enhancing cross-sell opportunities across the group,” the insurer said. 

“It will also enable the group to accept retail deposits, thereby providing a cheaper source of funding.”

Williamson said Old Mutual’s bank completed its section 16 submission to the Prudential Authority at the beginning of 2024 and is now awaiting approval. 

As part of the section 16 submission, the company must have the banking systems and processes independently verified in a working end-to-end scenario. 

Williamson said the bank build was completed within its initial budget of R1.75 billion at the end of last year. Old Mutual also had an independent audit firm that analysed its systems and processes before seeking regulatory approval. 

The next step for Old Mutual is the section 17 submission, which allows them to notify the industry via the Payments Association of South Africa that we intend to test the National Payments system in the latter half of 2024. 

This integration will take around three months once approval is given. Only after this integration can the bank be tested end-to-end. 

Iain Williamson
Old Mutual CEO, Iain Williamson

The company’s annual report shed more light on which part of the market Old Mutual will be targeting with its bank in South Africa’s highly competitive financial sector. 

It said building a bank is central to its plan to become a fully integrated financial services ecosystem and the primary touchpoint for its clients. 

Old Mutual built the bank from scratch using cloud technology from 10x Banking, allowing it to deliver personalised, cost-effective and flexible solutions to its customers. 

In particular, the insurer is targeting the upper mass market and lower affluent consumers – customers earning between R5 000 and R80 000 per month. 

This has traditionally been Capitec’s stomping ground. It has done exceptionally well in this segment and has grown rapidly to serve over 20 million customers. 

After growing its customer base, Capitec has shifted its focus to offering more financial services such as business banking, insurance, and telecommunications through Capitec Connect. 

Williamson has previously said that the core of the bank’s client base would be mass-market South African consumers rather than middle- to upper-income clients. 

The insurer plans to leverage the 3.1 million customers served by its Mass and Foundation cluster to lure new clients to its new bank offering.

This cluster serves low-income and lower-middle-income individuals, who typically earn between R1,000 and R30,000 per month. 

These customers, which include salaried workers such as police officers, teachers, and nurses, are served via a range of offerings, including life and funeral insurance as well as savings and lending products.

Williamson said the insurer is well aware of how competitive the country’s banking sector is and is going into this venture with its eyes wide open.