S African banks entice millennials with concerts, free food

Bloomberg

From free burgers and ride-hailing services to hip-hop concerts and discounted gasoline: South African banks are going all out to win customers as competition hots up.
The biggest lenders are facing an onslaught of entrants for the first time in 12 years. They’re responding before the newcomers find their feet by pushing loyalty programs, revamping digital offerings for technology-savvy millennials, targeting existing customers with extra products and services and cutting fees.
The challengers — some of whose founders or senior staff cut their teeth in the banks they’re now up against — couldn’t be coming at a worse time. Most lenders are reducing costs, retrenching staff and closing branches to cope with an economy that hasn’t expanded above 2 percent a year since 2013 and a move towards the increased use of digital services. Tax increases, higher utility costs and stubbornly high unemployment are squeezing consumers, who are not only looking to cut their expenses but also want more convenience.
“Banks are becoming more client-centered — many new players are entering the space offering a basic-banking account at competitive prices, so they have to create stronger
relationships with existing clients,” said Nolwandle Mth-ombeni, an analyst at Mergence Investment Managers in Cape Town. “Technology has become the biggest expense item for some of the incumbents as they try compete with new entrants that don’t have any legacy systems.”

BIGGEST LEVER
FirstRand Ltd.’s First National Bank, Standard Bank Group Ltd., Absa Group Ltd. and Nedbank Group Ltd. are using credit as their biggest leverage over new contenders, according to Jan Meintjes, a portfolio manager at Denker Capital.
Central bank data shows that term loans jumped almost 15 percent in the 12 months through February after contracting the prior two years, while the value of credit-card debt increased 9.2 percent from 4.7 percent a year earlier, after shrinking in 2017.
Lenders are turning to different approaches to snag customers. Nedbank got local rapper Ginger Trill to launch an offering that gives university students a cheap account, credit-card facility, as well as fast-food restaurant and ride-hailing vouchers. It also added a digital personal assistant and concierge offering to its app that links to a network of 350,000 product and service providers.

CROWD OUT
“We’re trying to amplify our brand’s resonance,” said Managing Executive for Consumer Banking Mutsa Chironga. Nedbank, known for targeting affluent customers, also plans to revamp its loyalty program and digitise its platforms.
First National Bank tries to get eyeballs to its app by connecting business customers with retail clients, or home buyers to sellers so they can do deals without a realtor.
FNB is also digging deep into its client data to find cross-selling opportunities.
“Where we see a transactional relationship with us, but a credit relationship elsewhere, we try to crowd” out competitors, said Chief Executive Officer Jacques Celliers. FNB rewards cardholders filling up at stations owned Engen Petroleum Ltd., the country’s biggest fuel distributor, through its eBucks program. “Our growth in insurance and the exciting opportunities we see in investments will be key avenues for growth.”