Across the globe banks are under attack from many quarters. New players are entering the market, targeting specific parts of the banking value chain. For example, in money transfer and payment services, non-bank players increased their market share globally from 15% in 2015 to 50% in 2011. New regulation has been the driving force behind change in many markets including for example the UK, where 10% of consumers already bank with a new entrant, and a further 15% expect to do so within the next five years.
The US in many ways lags the rest of the world in terms of the market share impact new challenger banks have had to date. One way of gazing into a crystal ball to predict what the future might look like is to look across borders to markets in Europe, Asia, Africa and Latam.
Serving the underserved
In South Africa and across many markets in Africa and Asia, incumbent banks struggle to deliver quality services to many consumers at a profit. Expensive legacy infrastructure, operational overhead, and costly branch distribution models mean bank products are typically expensive and designed for a smaller, wealthier customer base. The result is that the majority of consumers are excluded or underserved.
In the past, deposit, withdrawal, and transfer fees in South Africa ranged from 100 rand (about $7 USD) to a whopping 450 rand (about $32 USD). These fees are considerable in a country where the minimum wage is just 20 rand (about $1.50 USD) per hour.
TymeBank in South Africa is one of a new wave of challenger banks that are changing the face of banking and bringing it to communities that have historically been ignored or underserved. TymeBank has quickly gained traction. In the 15 weeks prior to their official launch on Feb 24, 2019 they opened over 80,000 new accounts and expect to open more than 100,000 a month by April 2019.
Combining offline and online models
TymeBank offers a twist on the traditional digital only challenger bank model. They’ve combined best in class, low-cost digital channels including online and mobile banking, with physical kiosks and a partnership with two major supermarket chains: Pick n Pay and Boxer. As of March 2019, TymeBank kiosks were present in over 600 stores across two of the largest supermarket chains in South Africa, and just weeks away from extending across all 730 stores in the combined network.
These TymeBank kiosks enable new customers to open a fully FICA-compliant bank account in 3-5 minutes, printing their new TymeBank Visa Debit Cards on the spot so they can start to use them immediately.
The relationship with Pick n Pay and Boxer also means TymeBank customers can deposit or withdraw cash at any store till point or checkout, providing TymeBank with 14,300 points of presence across South Africa. This is considerably more than their established competitors Absa (9,200 points of presence), Standard Bank (6,200), and FNB (4,700).
“We broke the banking mould because it didn’t fit our market—so we built our own. It’s customer-centric, intelligent, and it’s helping South Africans enhance their financial wellbeing and literacy.”
– Coenraad Jonker, Group Executive, TymeBank
Messaging as a channel, conversation as an interface
In addition to its broad physical presence via the supermarket chains, TymeBank has evolved their digital channels so they can meet and interact with their customers in their channels of choice.
In South Africa – as in many markets – this has meant bringing banking to major instant messaging platforms and enabling customers to interact with TymeBank through familiar chat conversations. Working with Finn AI, TymeBank has launched its virtual assistant Max into Facebook Messenger and Facebook Messenger Lite, with plans to roll out to other major messaging platforms in the near future.
This agile and accessible ecosystem is especially helpful to serve the underbanked population, a prime objective for TymeBank. By making it easy for people to connect to their bank, TymeBank can fulfill their objective to help South Africans learn about their money: how they can improve their financial profiles, credit scores, and how to get ahead using goal-based savings.
Lessons for the US
In the United States, 33.5 million households—representing over a quarter of the population—are recognized as underbanked by the World Bank’s Global Findex. This means they lack the ability, criteria, or financial literacy to access banking services—and traditional banks find them too risky or too costly to serve.
Banks such as TymeBank make it possible—and profitable— to serve this segment of the market. And, while there is still a higher barrier to entry for digital banks in the U.S. (due in part to complex state-by-state banking regulations), where there is a demand and a will, there’s a way. As the TymeBank model proves, new challengers are very creative in how they blend the online and offline worlds and erode the historical distribution advantage banks have dominated through their branch networks.
North American banks and would-be banks should take some lessons from the success of TymeBank and reap the rewards of serving an underbanked population.