South Africa’s new OM Bank taking on Capitec

South Africa’s banking industry is highly competitive, making it a challenging environment to run an existing bank or launch a new bank.

However, this did not dissuade Old Mutual from progressing with its plans to launch its new bank, named OM Bank, before the end of 2024.

Old Mutual said launching OM Bank will help it maintain its primary relationship with its customers.

It will also drive greater regular interaction with them and enhance cross-sell opportunities across the Old Mutual group.

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

It is targeting the upper mass market and lower affluent consumers earning between R5 000 and R80 000 per month.

This is Capitec’s home turf, which means OM Bank will take on South Africa’s largest bank by customer numbers.

Kokkie Kooyman, director and portfolio manager of Denker Capital, said branding is very important when launching a new bank.

In Old Mutual’s case, its bank will build on its strong brand. It is called OM Bank and has similar branding as the parent company.

Old Mutual CEO Iain Williamson said they want to shake up the local banking sector with new innovations and solutions.

Kooyman argues that the South African financial services market is already very innovative, with Bank Zero, TymeBank, and Capitec disrupting the status quo.

“Old Mutual obviously has something special in mind. They may simplify banking through technological innovation,” he said.

“Technology is rapidly changing. The newer your technology is in the retail space, the more impact you can have.”

Old Mutual also has the advantage of a large client base. “They can email their 3 million clients offering them banking products,” he said.

However, even with this client base, they will have to be competitive and offer something better than the current banking offerings.

Banking is a tough sector

Kokkie Kooyman, executive director and portfolio manager at Denker Capital

Kooyman said South Africa’s banking industry is highly competitive, illustrated by Bidvest’s plan to sell Bidvest Bank and FinGlobal.

Bidvest said it was undergoing a strategic shift, streamlining its operations by divesting its financial services division.

This means selling Bidvest Bank and FinGlobal to concentrate on their core competencies in hygiene, facilities management, and plumbing product distribution.

Kokkie said Bidvest Bank’s decision to exit banking to focus on more profitable sectors reflects how competitive the local banking industry has become.

Banking is also a low-growth area, reflecting the poor performance of the South African economy over the last fifteen years.

He added that banking is capital-intensive, with increased regulatory oversight and cumbersome compliance.

It also faces increased risk because of bad debts and has become volatile. Bidvest, therefore, decided to sell its bank.

He questioned the timing, as the new government may get things right and achieve stronger economic growth. It would bolster the price of Bidvest Bank.

Another challenge is that few businesses want to buy a bank in South Africa. “There are too many risks in South Africa to get an international bank interested,” he said.

Capitec and African Bank have been mentioned as potential buyers. However, they have their own strategies, which may not include buying a new bank.

“It is only if they are convinced it is a good fit for their operations and they want the Bidvest Bank client base,” Kooyman said.

Capitec is the most likely suiter because they will gain access to a client base they did not have before. It includes leasing and client services assets.


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