Neo-banking is set to boom in South Africa, with almost a quarter (24%) of South Africans surveyed expecting to bank only digitally by 2023.
This is according to financial data analytics company Finder’s Neobanking Adoption Report, which is based on a survey of thousands of digital citizens across 14 markets, including SA. Some 2,179 respondents were South African internet users.
The report shows that about 15% of local adults surveyed currently have a neobank account, and another 9% plan to open one by 2023, bringing the percentage of local respondents with a digital bank account to 24%. This figure is projected to jump even higher to around 31% of South Africans by the end of 2027.
Neobank – also known as internet bank, virtual bank or digital bank – is a type of bank that operates exclusively online without traditional physical branch networks.
SA’s retail banking industry has been revolutionized over the past three years by the rise of digital-only banks with the launch of TymeBank, Discovery Bank and Bank Zero. The main feature of these new branchless banks is that they provide competitive rivalry in the local banking sector through flexible offers and lower costs.
This has resulted in traditional banks accelerating their digital targeting strategies and aggressively changing their platform model to offer innovative financial products and services to customers.
Elizabeth Berry, Finder’s global fintech editor, says neo-banks are becoming increasingly popular with consumers around the world.
“Neobanks allow consumers to create accounts from the comfort of their homes. They are usually quick to set up, have low fees, and mostly focus on providing a great customer experience. Of the countries included in the study, Brazil (43%) and India (26%) have the highest percentage of adults with unbanked accounts, followed by Ireland (22%) and Singapore (21%).”
However, neobanks still require an Internet connection and identity verification, so they’re not necessarily a must-have for the unbanked, she adds.
The COVID-19 pandemic has led to a sharp decline in customers visiting bank branches and an increase in digital interactions amid fears of the virus spreading.
Image source: Finder
According to Finder, neobanks are particularly popular among South African men, with almost 18% of men surveyed saying they have a neobank account, compared to 12% of women. People aged 35 to 44 in South Africa are the most likely to have a digital bank account, with 178% of respondents having an active service.
In its three years of existence in South Africa, TymeBank has amassed five million customers and over 100,000 small businesses.
Discovery Bank says it has seen strong growth since its public launch in 2020, amassing more than one million bank accounts owned by more than 450,000 customers.
Bank Zero told ITWeb in October that it was seeing rapid growth in customer sign-ups, although the number was not disclosed.
In terms of countries with the most digital bankers, the report notes that in 2022, Brazil will lead the way for digital bankers, with 43% of respondents saying they have an account.
Brazil is followed by India (26%), Ireland (22%), Singapore (21%), Hong Kong (20%), United Arab Emirates (19%), Mexico (17%), Spain (17%) and South . Africa (15%).
At the other end of the spectrum, the US had the lowest percentage of adults with digital-only bank accounts (8%), followed by the Philippines and Malaysia at 13%, Portugal and Germany at 14%, according to the report.