Old Mutual is on track with its plan to build a bank and it has already spent R1.2 billion towards this from the R1.75bn its board approved for the project, Old Mutual CEO Iain Williamson said on Friday.
Speaking during an investor update, he said he had been asked many times since November last year, when the insurance and financial services group with some 12 million clients first announced plans to establish a bank, why did it plan to do so, given that the retail bank market in South Africa was, by his admission, already crowded.
He said by building a “cloud native bank” from the “ground-up”, using software-as-a-service, artificial intelligence and machine learning technologies, would allow the group to do financial processes that they were not previously able to, which would allow the bank to differentiate itself in the market by cost.
He said the bank would have a much lower operating cost than traditional banks, which would allow the group to share some of the value with clients that was created in this way, said Williamson.
He said the bank platform would also allow for customers to experience “radical transparency” in their transactions, while the system being developed for the group by international banking platform development firm 10X Banks, would also allow Old Mutual to constantly and quickly update its products to meet its changing client needs.
In the past, new product development used to take months and a great deal of skilled man-hours to complete. The new bank model would also allow the group to integrate its customer relationship systems into the platform.
He said the new bank would help the group on its strategy of being a fully integrated financial services provider to its clients. It would improve interaction with its clients, it would increase cross-selling opportunities, while also providing access to short term funding through the taking on of deposits.
He said they were targeting the launch of the bank in 2024, and the group did not wish at this stage to say when the bank might reach break-even.
He said the group’s core business market, which comprises some 9m of its 12m clients, remained cash and earnings generative in the past six months, while the “new growth engines” in the group were making a much smaller, but growing contribution.
The strategy for an integrated financial services group would be to develop the banking and lending capability, the life and savings, the asset management, and the property and the casualty financial services platforms. Interaction with clients would be either digital, through an advisor, in person, or via the branch network.
Zureida Ebrahim, Old Mutual’s chief operating officer, said the mass and foundation cluster of the group’s businesses was performing well with good sales. The launch of the Old Mutual Protect product in 2021 was being well received, and had reduced policy lapse rates.
The group’s rewards programme had been enhanced and it now has some 2 million members.
She said another new product, SMEgo, was launched this year to provide access to financial services for small and medium sized enterprises (SME), and it already had more than 4500 SMEs as clients.
She said the rewards program was being integrated across all the group’s solutions, while home loans and financing for eco-home solutions such as inverters and solar solutions would be launched, which in turn would also provide opportunities for Old Mutual Insure.
Also this year, Old Mutual launched a fintech O’Mari, in Zimbabwe, which provides services in the mobile money, insurtech and healthtech markets, and this product had gained some 50 000 new customers in only five weeks, said Ebrahim.
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