The drive to digital in South Africa – Bank Zero 01 November 2021

Yatin Narsai, CEO at Bank Zero, discusses how the bank’s value proposition, built from the ground up, is perfectly suited to a world where banking – for both individuals and businesses – has become digital. 
What value has digital generated for Bank Zero?
Bank Zero was made for a pandemic world as it has zero paperwork (registration and transactions), can be operated fully remotely (no visit to branches/kiosks/brokers required) and will bring significant savings to hard-pressed individuals and businesses. This is urgently needed with households and businesses facing financial stress - savings from exorbitant bank fees will bring huge relief.
Bank Zero is unique in that its starting value proposition includes the complex needs for business banking. It also extends this by addressing much needed innovations and security such as providing businesses with a higher degree of protection from the all-too-common tragedy of being defrauded by unexpected criminals in their midst. More customer relief will come from reduced ‘phishing attacks’ that result in financial losses, as banks have to repudiate these claims.
South African cardholders suffered just over R1b in theft in 2019, according to SABRIC statistics. To protect customers from this traumatic experience, Bank Zero has designed a new patented card which offers vital security and convenience. This patent will dramatically minimize the negative impact of card data theft and card skimming on Bank Zero customers.
How have you driven your digital agenda?

Prudent use of capital required that accurate business blueprints were delivered from the get-go. This approach enabled us to bring a revolutionary new core banking system to market with pervasive encryption and digital scaling. It is fundamental to our low-cost, high-capability offering.
During the development of Bank Zero, no traditional banking systems were bought nor was any outsourcing done – these are expensive yet conventional solutions. We wanted to create an exciting customer offering which required building our own systems. Six payment rails were created, each from a clean slate:
• Direct integration into the South African Reserve Bank’s system, in order to become a settlement bank
• Electronic payments (EFTs) and debit orders, establishing Bank Zero as a clearing bank
• Issuing and processing of debit cards
• Sending money to any South African cell number (including yourself) – money is cashed out at Shoprite / Checkers which is a massive retail chain. Sending to self allows for cardless cash outs and is vastly cheaper than ATMs.
• QR code-based payments for fast and immediate payments without sharing your cell or account number. Businesses will benefit from much lower fees as well as enable micro payments.
• Buy prepaid items like airtime, data, and electricity

Zero pricing, along with our advanced card security, are just some of the ways in which digital makes our customers’ lives easier. We also bring special functionality around social connectedness, transparency, control, advanced payments, and a focus on savings. Feature-rich banking must never force customers into paying exorbitant fees.

Businesses pay far too high basic banking fees. At Bank Zero the same pricing for individuals also applies to businesses. This brings huge relief. Businesses will also enjoy free seamless integration with Xero Accounting / GL software. It’s a great starting point as Bank Zero itself uses Xero Accounting.
How much have you invested in digital?
We’ll share this information later. Our capital and cost efficiencies remain a core strength. Customers will benefit significantly by way of much needed features and pay lower fees.
On a scale from 1 to 5, how to you rate the value generated by digital?
SA banks have good digital offerings - if you take away the branches and call centers, you are then left with pure digital banking (through apps and the internet). Competition is strong and a rating of at least 3 is fair – one or two banks offer better digital solutions but in the main 3 is fair for the industry. 
Has digital lived up to expectations? Has it really transformed the FS industry?

Yes and yes. Digital is only getting started and will evolve into greater customer service and convenience, functionality, and much lower fees. Laggards who fail to or simply can’t adapt will eventually disappear. While barriers to entry remain very high, more and more fintechs are entering the industry from widely different angles. Some may fail along the way but those that break through will create long lasting effects.
How much more can digital contribute to the FS industry going forward?

Plenty. Its only limitation is the strength of the all-important core banking system (that serves customer facing digital platforms) and supporting back office systems.
Traditional banks prior to our pandemic world were constrained by deep legacy systems and now face the added complexity of outdated business models. These are massively expensive to operate and can no longer be subsidized through high customer fees. In time banks will have to become like Bank Zero. 
What are the key threats to digital going forward and how prepared are you to manage them? (evolving customer needs driven by Big Tech, blurred lines between industries driven by ecosystem integration)
The single biggest threat is cyber-crime and security. It doesn’t matter how advanced or meaningful the digital offerings are as cyber security is now fundamental. The most secure bank will become the most trusted bank.
Our collaboration with IBM is key. IBM has gotten the measure right when it comes to high-volume secure computing. Based on their multi-decade server expertise and research, IBM provides Bank Zero with breakthrough enterprise-grade security on its open-source based LinuxONE™ enterprise server through its pervasive encryption technology. We combine these advanced high-performance secure servers with the incredible local processing power of smartphones to create powerful new possibilities for digital transformation. LinuxONE is a perfect fit for Bank Zero – underpinned by innovation, security, scalability, and reliability. Other cybersecurity measures are built on top of this foundation to offer multiple levels of security and control.
Building a bank is hard work; building an innovative bank is exponentially harder. 
Want to know more about digital transformation in South Africa? Download your free copy of Efma-Oliver Wyman paper Digitizing financial services in South Africa

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