Q&A with Steve Bailey of Standard Bank on becoming an MVNO periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Ian Ginn, Founder and Director at IFG Consulting spoke with Steve Bailey to discuss Standard Bank’s approach to leveraging its MVNO capability as a traditional bank.

By operating an MVNO, a bank becomes able to directly package connectivity for the use of its digital services, providing easier and faster access and simultaneously offering its customers mobile and banking products in a single solution. In addition, by making a bulk purchase of telecommunications networks, the bank becomes able to pass on a pricing advantage to its customers that allows them to connect to their services at the lowest possible cost. Essentially, bringing the banking industry closer to the world of MVNOs leads to the creation of new unified packages of mobile and banking services because it becomes more affordable.

Standard Bank adopted this strategy and embarked on this journey in 2018 by creating an MVNO and provides data and airtime solutions related to customers’ banking activities. Mixing the mobile and banking service offerings into a single solution also allows for the creation of more personalized proposition tailored to the needs of the individual customer, which therefore makes it further advantageous.

Standard Bank’s aims are essentially based on the assumption that almost every banking activity can currently be managed through one’s phone and that, in order to provide more people with access to banking services, it is necessary to allow access to connect with the bank through telecommunications.

This process will essentially lead to an increase in the number of people within the financial system, with consequent economic growth that the Standard Bank MVNO’s CEO hopes will involve not only South Africa, but the entire African continent.

Here is what Steve Bailey said when Ian Ginn, Founder and Director at IFG Consulting, caught up with him related to Standard banks approach to leveraging its MVNO capability as a traditional bank.

What journey did you take to become an MVNO to sell financial services?

We are more a financial services company that has started an MVNO which is quite an important distinction. There are quite a lot of Telecoms Operators who want to get into financial services. It Therefore makes sense that a financial services company would want to provide telecom services. The distinction is that we are a financial services company beyond a bank and for a number of reasons we thought that it was a good idea to start an MVNO and start providing telco services to our clients.

How do you leverage telecom with Banking services?

To a certain extent a bank account is a bank account. How do you differentiate and offer value to your customers? What we do is package telco services with bank accounts. We don’t necessarily give a stand-alone mobile service offer. It is always part of the banking offer. By putting the two of them together we hope to provide superior value to our customers. The customer almost get the telco service for free or at cost.” We are not necessarily aiming to make the telco a profit centre, rather using this as a way to enhance our financial and banking services. With every Standard bank account, you get free airtime and free data with your account. You get data when you swipe your credit or debit card, you get free data if any is on our U Count (our loyalty and rewards) programme.

We can whitelist URLs and zero rate access to certain websites.

Everything links back to the bank account. This makes our banking services more attractive which helps us to retain customers and also attract new customers as we are able to offer them more value and particularly important for an African bank is that we are digitalizing services and taking them out of our branches and offering cheap or lower cost connectivity makes sense for us as it allows customers to access our digital banking services instead of the traditional channels. 

Being an MVNO and providing people with digital mobile connectivity to the bank, do you feel that you can provide a better service than traditional banking?

“I wouldn’t say that. You can access our banking services using any SIM. What we can do is offer the SIM service to you at a better cost because we want to provide you the connectivity so that you can use the bank services, including for cost sensitive customers. If you have a bank account and a SIM account with two different operations you’re wasting money, because basically you can get the SIM for free with us.

What’s the cost difference in SA if you use telecoms and banking separately?

I am fortunate enough to have a private bank account. In SA personal bank accounts come with charges, so my bank charges are about £35 per month, so I’m getting £35 of data for free each month. My personal mobile phone bill is therefore almost nothing. When I use my credit card I’m getting free data as well, so I’m hardly paying anything for my personal mobile phone.”

At the entry level the bank account costs around £0.25, and you would get around £2.50 of airtime. This represents a significant amount of airtime and will enable the bank customer to access the bank services. In SA we have a large part of our economy who have to watch every RAND. This is very meaningful.

Do you have an objective to bank the unbanked?

Yes, in time and I can explain why that is the case. We want them to choose us over the other banks. They won’t get this airtime concession from another bank. It’s additional value so we are trying to attract the unbanked customers and keep them at our bank rather than moving to another.

What part of your mission is it to use mobile networks as a way of facilitating banking for those who can’t physically get to a bank due to location?

We have one of the largest Gini coefficients in the World which is the gap between the richest and poorest in the country. You have a majority group who live on the bread line which is a significant number. In SA there is a significant number of people that lives on a distance from a bank and get to a bank would cost them significant money and not something they want to do. That’s the other part of telco which is important to a financial services company. As you know telcos are good at connecting customers outside urban areas. The banks do not do that, at least where I am in SA, where you have to go to a branch. We are taking some of the lessons we have learnt from Telco, the way they connect customers, we are going to take those learnings and bank accounts, where you will be able to open an account outside of a branch.

Currently you do need a card to access banking services, but this will be changing. There are some onerous Know Your Customer (KYC) requirements which are not easy to do outside the branch. We need to solve this issue as well, which we have done, but now need to put this all together to enable this to happen outside the branch.

Do you have any plans to replicate what you’re doing in other countries?

Yes, it’s part of the plan but every country in Africa is very distinct and every market and territory is different so you must look at each one individually. In general, in Africa the telcos are taking over transactional banking and they are all turning into mobile money and mobile banking, so have eaten traditional banks lunch. Traditional banks are generally taking care of corporate markets and individual taking is being taken care of by the telcos. I guess there is an opportunity for a bank to consider doing it the other way round, but it will take a significant effort and resources. Any MVNO or MNO who wants to provide mobile money and banking services needs a bank behind them.

Related to Standard Bank, what’s next? What plans have you got?

For the moment, from the MVNO point of view, we are focusing on SA. On Monday we launched our device products as we only provide SIMs plans up to now. There are some exciting products which are Telco financial services hybrids which we will launch next year.

What is your advice to MVNOs who are thinking about going through financial services business?

My advice is that MVNO’s must go to the financial services business because there is a lot of convergence between financial services, insurance, and telcos. The days of a company doing one or the other are short lived. There has to be the potential to sell and provide a whole range of financial services to existing customers without trying to find new ones.

  • MVNOs North America

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