Healthier African Bank ready to make up for past mistakes
After stripping off the band-aid of curatorship last year and relaunching, African Bank, the once ailing micro-lender, is emerging from its recovery and plans to offer existing and new clients products that it hopes will lure them from competitors.
The bank, which has partnered with MMI to offer insurance products at its branches, expects to launch its transactional bank by June next year.
Following this, African Bank has plans to tie up with a telecommunications company to deliver data-driven products to customers, though it was mum on exactly what these would be.
"We want to bank, insure and connect. If people are saying data is now a human right, we want to provide data to customers cheaply and in a timely way," said Basani Maluleke, African Bank's operations executive earmarked to become CEO when Brian Riley steps down in March next year.
More affluent market
African Bank's transactional bank will be launched internally to staff as early as February and its success will be Maluleke's priority should she succeed Riley. One of her tasks will be to ensure that the bank's customer base grows to include affluent retail clients.
"The vast majority of South Africans are in the lower end of the market, right? We're definitely not taking our eye off that ball. These are the guys that have sustained the bank through good and bad times and they really love the bank.
"At the same time we realise, because we've changed our credit appetite, it does mean we need to be looking at a more affluent market to be able to grow our advances book," she said.
While African Bank was a healthier, diversified and better capitalised organisation than it was three years ago, it was entering a highly competitive transactional banking space, said Wafeeqah Lagerdien, an investment analyst at Futuregrowth Asset Management.
In addition to established banks improving their services to fend off competitors from encroaching on their market share, TymeDigital by Commonwealth Bank South Africa and Discovery Bank are due to be launched next year, which is likely to prompt aggressive cost-cutting in the sector.
TymeDigital will chase underbanked clients, similar to Capitec's market, but Discovery will head into the already highly concentrated affluent retail space.
Maluleke said African Bank had realistic expectations of the upper end of the market. "We're not going to get the people that bank with Investec to join us tomorrow. The key is to start with the clients that we know love us and build from there," she said.
African Bank will continue to grow its base of 388 outlets with digital branches that would have free Wi-Fi and online banking, while still offering face-to-face services.
"Shopping malls globally are struggling, so we use geo-mapping to look at where people are moving to. The main criteria for us [to open a branch] is population movement and the level of relative affluence in that area," Maluleke said.
Releasing its financial results for the year ending in September on Friday, African Bank reported a shrinking client base as its lending criteria became more stringent, but retail deposits were up R213-million year on year to R357-million - with longer 5-year deposits making up 60% of its new business.
This optimism around African Bank's future, however, contrasts sharply with the sentiment that outgoing CEO Riley faced when he joined in 2015. The old African Bank, which collapsed under its reckless lending practices and was subsequently placed under curatorship in 2014, "was not an easy business to defend", he said.
"No one's happy about the past. Some of our investors and funders were hurt emotionally about what happened, so we have to work extra hard to overcome that. And with some people we won't."
Riley was responsible for the bank's new strategy, which is underpinned by its "humanity through banking" mission, and described the bank's culture shift as his greatest challenge.
"It was an unstructured culture. The executive had no performance parameters. They had tons of enthusiasm and believed heavily in what the [management at the] top had said. It was a very pleasant place to be," Riley said.
So the challenge was retaining the enthusiasm while putting in place policies to make the bank sustainable.
While Riley and his team had made mistakes since he took over, such as outsourcing the bank's call centre with disastrous consequences, its strength had been its ability to fix its mistakes quickly.
"It's okay to fail but you have to understand quickly that you've failed," he said.