FIFI PETERS: Patrice Motsepe’s African Rainbow Capital-backed digital bank ARC just raised more than 1 billion rand from foreign investors, including Chinese tech giant Tencent. ARC Investments shares finished nearly 6% higher on the JSE today.
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Here, to explain what this capital increase means for TymeBank, I am joined by its CEO, Tauriq Keraan. Tauriq, thank you very much for your time and it’s good to talk to you again. It is quite a considerable amount that has been raised from foreign investors. Tell us about that process.
TAURIQ KERAAN: Good night, Fifi. Thanks for inviting me. This is really an extension of our B Series that started last year. We started by incorporating Apis and JG Summit, our partner in the Philippines, and then we concluded with Tencent and CDC. It’s hugely momentous, not just for our business, but I think it’s a huge vote of confidence in the South African banking scene. Both investors are not only bringing in very strong capital and pockets, but more importantly, they are bringing massive added value in terms of expanded networks and expertise.
FIFI PETERS: Where does the money go?
TAURIQ KERAAN: In two places, Fifi. Approximately 30% of the large amount of money will go to our international business to finance expansion. In South Africa, we have created a fantastic digital banking implementation, which has significant applicability in other markets that display very similar attributes to South Africa.
The first market we will be targeting outside of South Africa is the Philippines. We were recently granted one of six new digital banking licenses for the bank, the process of which is well advanced and we need to publicly launch that bank on the market next year.
The rest, so around 70%, will go to a third funding …… 2:21 in South Africa. You know, our proposal has been getting richer, it has been enriched over time and has resulted in a rapid growth and diversification of our customer base in South Africa, who seek to bring some very interesting products to the market during the first half of next year. . year, as well as to make our association with TFG, The Foschini Group a reality.
FIFI PETERS: How’s that going?
TAURIQ KERAAN: The association with TFG: I think we signed that agreement a couple of months ago. I have to say that development has progressed very quickly so we are already up and running with our buy now pay later product called MoreTyme in over 400 Jet stores. Towards the end of next year, we will be looking at expanding it to other TFG brands. But, more importantly, everything is in the hands of the pump to bring our banking proposal to fruition within the TFG stores, and there we are looking at the launch of 600 new kiosks over the next year. That’s a new technology, so it will be our third industrialized version of the kiosk in a shorter space: two and a half years.
Then later, we will look at responsible forms of lending, based on the data that we built through… ..3: 53. So the association is progressing well and a good relationship is being formed.
FIFI PETERS: Tauriq, you and I are having this conversation on a day when our GDP figures came out, and most sectors of the economy have been weak, except … 11? I say for finances. In fact, that was one of these sectors that grew, and you’re talking about bringing more money into this sector with more investments. We had this conversation before among friends, to say that it is welcome that the financial sector is growing, but we wonder how labor intensive our financial sector will be, especially in this new digital age.
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TAURIQ KERAAN: At the most macro level, it is incredibly sad on a human level to see what is happening to the economy. I think the contraction we felt in the third quarter was somewhat cyclical in nature. The disruption through civil unrest and how that affected areas like retail and manufacturing was felt. However, I think that while banks’ market caps are closely related to GDP, that’s really for mature banking companies.
The challenge for companies is to grow on a completely different plane, creating a new market share, taking market share from other sides. I don’t think there is a close relationship with the growth of challenging organizations versus GDP. We are not completely isolated and not without our challenges, but we also have excellent tailwinds.
This investment is significant because it will allow us to expand our product file, as well as our distributions… ..6: 05. But I think it is also very important that we recognize that both the CDC and Tencent have immense experience, they have invested in many companies in many different geographies, and the learnings you will be able to share with us will be invaluable to the growth of the Bank.
We have had a great impact on the lives of ordinary South Africans, Fifi. An organization like CDC, which is one of the most impactful investors in the world, would not have invested in us had it not been able to see the positive impact and change we have brought to the lives of ordinary South Africans.
So I think this investment both in terms of lessons learned, the need to accept …… 6: 57 that they bring, as well as capital, will only allow us to further enhance that impact.
FIFI PETERS: It has brought many South Africans who perhaps previously did not have bank accounts into the formal financial sector, and says it is growing quite fast – four million new clients in 32 months. But Tauriq, how many of these accounts are actually active?
TAURIQ KERAAN: Let me start this off by saying that, in contrast, for the last 15 years or so since I’ve been closely involved in digital banking, the unbanked population in South Africa has …… 7:39 significantly, largely due to the way that we handle the distribution of social benefits. But there are still significantly underserved pockets. Even those customers who receive good service, many of them are not satisfied with the levels of service they receive from their bank, so there is a great opportunity. Of the barely 4.2 million clients, as we speak, about 2.6 / 2.7 million are active, which means they have generated us revenue in the last 30 days. I would just like to warn us not to view the rest as inactive and inactive accounts, because what happens is that the active rate has been improving with Tyme all the time. When we launched the bank it was less than 50%; now it is around 65%, and this is due to the dynamics that we are seeing, where thousands of clients every month are activated for the first time. So that idle base, because it’s incredibly inexpensive for us to onboard clients, shouldn’t be seen as wasteful. It is different from the branch model in that it has an incredibly high cost of ownership.
FIFI PETERS: All right, point taken. We leave it there. Thank you very much for your time, Tariq Keeraan, CEO of TymeBank.