All The Ways We Can Expect TymeDigital To Shake Up SA's Banking Sector
Consumers and fintech sector set to benefit
Expectations are high for TymeDigital by Commonwealth Bank, the newly licensed digital bank backed by billionaire Patrice Motsepe.
The digital bank made headlines last week, becoming the first new bank to receive an operating license from the South African Reserve Bank since 1999. Motsepe's African Rainbow Capital (ARC) acquired 10% of TymeDigital from Commonwealth Bank last month.
TymeDigital is set to launch in 2018 and is expected to become a full service digital bank. It currently operates the money-transfer service, Money Transfer, in partnership with Pick n Pay and Boxer stores and has secured more than 200,000 customers for the service.
TymeDigital CEO, Sandile Shabalala, said in a Business Tech report that they are aiming to disrupt banking in South Africa.
Good News For Everyone
The development is good news for consumers, the banking sector and the fintech sector in the country, says Dominique Collett, head of Alphacode, a hub for fintech startups. She is also one of the original founders of the digital banking startup which was acquired by the Commonwealth Bank of Australia in 2015.
A foreign investor, like Commonwealth Bank, entering South Africa shows that the country's banking market is still attractive, she says.
It also says positive things about the banking regulator, she adds. Firstly, that they are progressive and are willing to open the sector to competition. "More competition is always good for consumers," including improvements in both customer experience and cost.
Fintech startups should also see the development as a positive for the industry, she says. The granting of the license shows the banking market is open for opposition. "They have also opened up the space for new value propositions - of which fintech can only benefit."
At heart, the development is about financial inclusion, says Collett, in a country where 10 million people are underserved or not served at all, Tyme is expected to target the lower end of market.
"Capitec came in at the lower end, we have seen them increase their market share in the mid and higher segment, Tyme could do the same," says Collett.
Reactions to the digital bank have largely been positive, but it is also expected that its entry will not be without challenges, particularly from its competitors as well as the current tough economic climate.
Beyond the headlines - This is what other experts are saying about SA's newest banking contender.
A Potential Threat To Incumbents
The new player is likely to increase pressure on the country's established big lenders, says Andile Masuku, an entrepreneur and tech writer in an IOL report.
"Tyme's value proposition is viewed by many as the most significant emergent threat to the dominance of South Africa's "big four" lenders since Capitec Bank launched 15 odd years ago," Masuku says.
It Won't Be Easy
The new player is predicted to struggle to find a foot-hold in the local market that is experiencing a tough economic climate and intense competition, according to Neelash Hansjee, an Old Mutual bank analyst, in a recent Fin24 article.
"A pure digital banking play would be an advantage as they will use the latest technology and won't have massive infrastructure costs like branches – so they will save on that. However, without branches it might be more difficult to win the trust of clients. Trust is an important enabler for a bank," says Hansjee.
Could Need Longer Runway To Take Off
Although Tyme is expected to gain traction, according to Hansjee, this growth is likely to take some time.
"TymeDigital shareholders would have to be patient as adoption of the bank and its technology could take years. Capitec took about a decade before it was a household name," Hansjee said.
See Also: The unstoppable rise of African fintech
Potential To Be Disruptive
TymeDigital is expected to be disruptive largely because of its KYC solution, according to a Business Tech article.
"Arguably, Tyme's biggest asset is its in-house developed "know your customer" KYC accreditation solutions. These allow customers to open a simple bank account over their mobile phone, and open an unrestricted bank account from a remote location instead of having to enter a bank branch," the article states.
Lays The Foundation For Motsepe’s ARC Growth Plans
Motsepe's African Rainbow Capital Investments is, with the new investment, taking on legacy players in the financial services sector, Masuku says in the article.
"Patrice Motsepe's latest mega-venture is no doubt being monitored very closely by banking incumbents in South Africa, given the disruptive potential of some of the firm’s plans to aggressively back innovative financial services businesses," he adds.