Having handed out the first three bank licences in 11 years, the South African Reserve Bank is keen to see more entrants into the industry to drive down costs for consumers.
Governor of the South African Reserve Bank, Lesetja Kganyago said “the preference is for more entrants because that brings down the cost of banking. We have got a concentrated industry”.
Speaking to editors at a lunch in Johannesburg, Kganyago said there will be no preferential treatment for the new entrants. He noted that they will need to comply with banking rules and will be policed as carefully as their more established competitors, even though they use new technology.
According to the Kganyago, “the debate elsewhere in the world is whether these technology companies should be allowed to operate in the banking space. Our attitude is yes they should be, but then they have to play by the rules. You can’t want to conduct the business of a bank without playing by the rules”.
The Governor also said the established competitors might also make new entrants the victim of takeover bids when they feel threatened. He said the big banks may say “ok, so you eat my lunch, then I eat you”.
All the newcomers operate on digital platforms that allow them to tightly control costs and keep fees low. These challenger banks will be going head-to-head against the country’s five largest lenders, including FNB, Standard Bank, Nedbank and Absa, who between them control more than 90% of banking assets in the country.