Bank Zero co-founder Michael Jordaan has confirmed that Bank Zero’s closed beta has started.
This follows Bank Zero previously telling MyBroadband that it planned to launch this beta early in the second half of 2020.
“At first this will be small groups which will then be enlarged over time,” said Jordaan in May 2020.
He said that Bank Zero would use feedback from these customers to improve its processes and functionality.
“This type of beta launch is quite common in the tech world and the opposite of large, often hyped launches in the corporate world,” said Jordaan.
Jordaan has now confirmed that this closed beta period has officially begun.
“Bank Zero is live and is operating across six payment rails. The closed rollout has started,” Jordaan said.
“Customers (individual and businesses) are being added in this closed rollout. It will then be followed by general public availability.”
He said that Bank Zero intends to be publicly available before the end of 2020, and more information regarding this will be provided soon.
Jordaan previously explained that Bank Zero selects who joins its public beta from interested parties who supplied their details on the Bank Zero website.
Bank Zero thrives under lockdown
Jordaan told MyBroadband that the closed rollout is currently performing well under the national lockdown and during the work-from-home conditions.
“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,” said Jordaan.
“We continue to gain useful insights from our current customer base which is being incrementally added into the platform and app.”
He said that this process means that Bank Zero is on track for full public operations.
Jordaan also previously told MyBroadband that Bank Zero had managed to switch to remote working relatively easily.
“The Bank Zero team all used to work in one open-plan office, so they could ill afford even one COVID-19 infection,” said Jordaan.
“Consequently they started working-from-home even before the lockdown was announced.”
However, Jordaan said that since a large number of the Bank Zero team are software developers, they adjusted to remote working easily.
“Everyone in the team has a broadband connection and simply switched to Zooming,” said Jordaan.
“Nevertheless the absence of all face-to-face meetings is not ideal and in some cases resulted in slightly lower efficiency than we would have liked.”
No CVV needed
MyBroadband asked Jordaan about potential competition against its card technology from FNB’s recently-launched virtual card feature, whereby a customer’s CVV number is changed every hour for improved security.
Jordaan said that Bank Zero doesn’t comment on competitors or their products, but noted that the patented Bank Zero Card technology has been live for some time and is “unrelated to virtual cards or CVV changes”.
Jordaan also said that CVV numbers are not completely secure.
“In our experience, criminals bypass CVV by shopping at merchants who don’t check for it,” said Jordaan.
Bank Zero has now fully completed its core value proposition by going live with its debit card. Following this card go-live, rigorous health-checks such as simulated card attacks, card fraud detection and retailer readiness are currently underway. Thereafter the final countdown to starting public operations will begin.
South African card holders suffered a whopping R873m in theft in 2018, 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 minimise the negative impact of card data theft and card skimming on Bank Zero customers.
Open source technology combined with a scientific design approach delivered this card in record time. MasterCard teams from South Africa, India and the USA were closely involved in validating and commissioning this card solution. IBM’s global expertise in encrypted card security was also tapped into. Michael Jordaan, Bank Zero chair, says: “Globally, banks are big spenders on such projects, often spanning multiple years, but sweat capital along with an integrated business-and-tech design approach is our strategic advantage.”
“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,” says Yatin Narsai, Bank Zero CEO. He explains that, in just over a year, three large 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
“Zero pricing, along with our advanced card security, are just some of the ways in which we make our customers’ lives easier. We also bring special functionality around social connectedness, transparency, control, advanced payments and a focus on savings,” says Narsai.
“Feature-rich banking must never force customers into paying exorbitant fees.”
The card go-live sets Bank Zero on the path to opening its digital doors to the public, and current internal beta testing continues to provide solid insights. Bank Zero now begins its final countdown towards starting public operations in the first half of 2020:
- Add the final ‘shine’ to the Android and iOS Apps for both individuals and businesses
- Put the patented card through its paces by actively using the first cards which recently arrived, sporting a fresh new design
- Confirm regulatory reporting is in order
- Perform the annual disaster recovery test
- Ensure that cards can be used internationally
- Confirm security and performance testing to ensure Bank Zero’s systems can handle massive volumes
- Implement a standby system, enabling maintenance without inconveniencing customers
- Fine-tune and complete the build-out of the customer service model
- Extend current beta testing
- Start public operations
“The last mile is always the hardest. You can walk this last mile with us by following our tweets,” says Jordaan.
Bank Zero appears set to accelerate the evolution of the South African banking industry by offering a fresh take on banking and highly competitive fees.
The bank — the brainchild of tech entrepreneurs and banking innovators Michael Jordaan and Yatin Narsai — has received a provisional licence from the South African Reserve Bank. It is due to launch a smartphone app, through which transactional and savings accounts can be opened and managed, in the fourth quarter.
The digital-only play, built using free open-source technology, is expected to lower banking fees thanks — in part — due to a lack of legacy systems and absence of traditional bricks and mortar branches, which will enable it to keep costs down.
“We certainly hope to come up with a very competitive structure. We do realise that we have certain disadvantages — we won’t have branches and we won’t have lending products — so we’re going to have to make an impact in the areas where we’ll play, being deposits and fee structures.
“It’s a bit too early to disclose exactly what we’re going to do because that would give competitors an advantage but we really hope to delight you and other potential South African customers when we launch toward the end of this year,” said Jordaan, co-founder and chairman of Bank Zero, when asked whether his offering would be cheaper than that of Capitec. Of the listed banks, Capitec’s offering, which includes a base fee, pay-as-you-transact charges and interest on positive account balances, is considered the most competitive.
In an attempt to nurture a savings culture, the bank is to offer attractive interest rates on deposits and has chosen upfront not to engage in lending.
Its target market includes individuals and businesses, which it feels are under-served by the traditional banks.
In a statement, Jordaan said the bank’s offerings would be in line with modern day realities, where the likes of Facebook, WhatsApp, Twitter and Instagram represent a new normal. “Why shouldn’t banks also innovate in this era of wider connectedness whilst still ensuring a robust banking value proposition? Bank Zero is addressing these realities, while employing cutting-edge technologies, minimising typical admin-intensive processes and delivering state-of-the-art security.”
Bank Zero is to operate under a mutual licence, like that of Finbond, GBS and VBS. This will allow the bank to create financial communities and give customers the opportunity to become shareholders in the bank. Bank Zero will, after breaking even, be able to issue shares along with voting rights to deposit holders.
Jordaan would not disclose the value of the capital invested in Bank Zero nor its breakeven point, saying only that it is more than adequate in relation to the the Reserve Bank’s minimum requirements. The bank is being funded by seven individuals, all of whom are seasoned banking or IT and software development professionals, and is 45% black owned.
“We are fortunate in that we didn’t have go to any institution to raise the capital. And that does allow us to take a slightly different approach to the market. It means that we can focus on the long term so we’re not just focused on chasing short-term profitability; nor are we chasing maximum profitability in the short term. We really think that there is an opportunity here to cast many of the benefits of the business model and of the technology back into the target market in South Africa.”
Although no institutions are financial backers of the bank, it will have to select one of the big four banks as a mentor bank to help it fully integrate into the payment system. Jordaan said Bank Zero has not yet selected a mentor bank but that it will do so with guidance from the Reserve Bank.
It is likely to become the fourth new bank to enter the market in 2018 alongside Discovery’s bank, Tyme Digital by Commonwealth Bank and Post Bank.
By Prinesha Naidoo for Tech Central