Old Mutual gets its banking licence

The insurer said on Friday that its Section 16 application for a banking licence to the Prudential Authority, the body responsible for regulating South Africa’s banking sector, was successful. Old Mutual also completed the necessary bank infrastructure at the end of 2023.

OM Bank has its sights on the mass market, which consists of individuals who typically earn between R1 000 and R30 000 per month and will compete with established players in this segment, such as Capitec.

Once fully fledged, OM Bank will join Discovery Bank, TymeBank, and Bank Zero, all of which have entered South Africa’s burgeoning banking sector in recent years. They are all vying to steal market share from traditional banking giants such as Standard Bank, FNB, Nedbank, and Absa.

Old Mutual applied for a banking licence in 2022. This is not the insurer’s first interest in banking, having held a majority interest in Nedbank between 1986 and 2018.

Old Mutual group CEO Iain Williamson mentioned when announcing the company’s full-year results for 2023 that the insurer is fully aware that it is entering a highly competitive space but that the bank will offer a unique value proposition.

“We look forward to shaking up the financial services space with innovations and solutions.”

Now that the Prudential Authority has approved Old Mutual’s application, the next steps include integration testing and connecting to the National Payments System. Integrating the bank into the payment clearing houses will follow a regulated process under the relevant industry standards.

Barry de Kock, equity analyst at Denker Capital, told Moneyweb earlier that the launching of a banking division is part of Old Mutual’s strategy to provide a holistic offering across all financial services. Although it could unlock growth opportunities, it also brings risks.

“We’ve seen many examples globally where companies that tend to go outside their normal operations find it to be more challenging than expected.

“The South African banking environment is already saturated. Ideally, as investors, we’d prefer Old Mutual to stick to insurance, their core competency,” he added.

Williamson says transactional banking capabilities will enhance Old Mutual’s ability to interact regularly with customers and “partner with them earlier in their life journeys”.

In early morning trade, Old Mutual’s share price was R9.98, 0.99% lower than the previous day. – moneyweb.co.za