GoTyme, Africa’s first profitable digital bank, gets physical

Going “phygital” – that’s what GoTyme will do from the end of this month by withdrawing its kiosks from Pick n Pay stores and rolling out “consumer hubs” instead.

It’s a rather strange way to say that, essentially, the bank that began its life as TymeBank, has realised it needs a more physical presence than it has had. 

These consumer hubs will be dotted all over malls in South Africa and will be staffed by trained GoTyme “ambassadors”, according to spokesperson Pontsho Ramontsha. They will provide services such as “account opening, card issuance and replacement, product education, app support and general account queries”.

It’s somewhat ironic, then, that this much-fêted digital bank is essentially replicating old-school bank branches. It raises the question: is a truly successful digital bank possible in South Africa?

This might seem like an odd question for what is one of South Africa’s most emphatic banking success stories. 

Launched as TymeBank in 2019, and backed by Patrice Motsepe’s African Rainbow Capital, it became Africa’s first profitable “digital bank” in December 2023. Having expanded into the Philippines four years ago, it now boasts 8-million South African customers and 20-million worldwide, and it has designs on Indonesia and Vietnam.

But in South Africa its reversion to a more bricks-and-mortar approach through kiosks suggests the digital-only approach may have proven to be a limitation.

Experts are split on this. 

“For many consumers that want affordable banking, there’s still a very strong need to serve them in person,” says Vincent Anthonyrajah, CEO of Differential Capital, a former analyst with deep insight into the banking market. 

Not only does a large portion of South Africa still deal with cash, Anthonyrajah argues, but when it comes to worrying about your money, “there’s an intensity of service level that is expected and sometimes an app just isn’t good enough – it doesn’t matter how good your digital systems are”.

For the people that GoTyme is targeting – the mass, lower-income market – there are several issues with a digital-only system. “Remember in South Africa there is a language issue,” Anthonyrajah points out. “And most digital service offerings are built in English.” 

An English-based app may not be optimal. Especially when you consider the success of Capitec, which has signed up 25-million clients, in part because many previously unbanked people were able to speak to branch assistants in their own language. 

“The banks still say that some 80% of their business is done face to face,” says veteran banking analyst Kokkie Kooyman, who is the head of global financials at the Cape Town-based Denker Capital. 

Kooyman argues that this isn’t just made up of the lower-income market, but the wealthy too. “Obviously the higher up you go, the more [clients] like a physical presence when you’re discussing complicated transactions. You want advice.” 

Discovery’s unique advantage

Everybody inevitably points to Discovery Bank as an example of a highly successful, fully digital bank. But there are several differences between GoTyme and Discovery, which make Discovery more of a banking unicorn than a model to follow. 

Unlike Kooyman, Anthonyrajah argues that “the higher the socioeconomic class, the higher the likelihood that [digital banking] would work”. 

His argument is that the wealthier the client, the more tech-savvy they usually are, and the less interested in prosaic branch services like cash deposits, safe deposit boxes or applying for loans. 

As it is, most of South Africa’s more sophisticated (and digitally sharp) banks, such as RMB or Investec, are more focused on private banking, and don’t typically provide the average retail banking services. 

This month, Discovery Bank said it had turned its first operating profit, R75m for the first half of its financial year, while its number of customers had grown 28% over the year to 1.4-million people. 

This sounds impressive, but that bank is only able to succeed in its digital form because of its existing consumer base and systems. 

“Discovery launched off an existing architecture,” explains Adrian Saville, professor of economics, finance and strategy at the Gordon Institute of Business Science, who co-wrote a book with Bruce Whitfield about GoTyme called It’s About Tyme. 

“Discovery is an established brand – it’s been around for decades, and it is trusted and well known,” he says. “With Tyme, there was never that affinity. That demands that they’ve got to figure out a different way to get into the line of sight of their customers.” 

With the consumer hubs, Saville says, GoTyme is leaning on well-established customer behaviour to be more visible not only to existing customers but also to potential new ones. “You’re far more impressed by [the hubs] than a kiosk,” he argues. 

Saville believes the strategy of these hubs is to “acquire a different segment of customers, versus where they launched in South Africa – and that segment of customers is what they have achieved in the Philippines”. 

The Lego set strategy

Now that GoTyme is an international bank, its “phygital” move may help it align better with its overseas operations in Asia, creating one digital banking model that can be easily transplanted.

But it’s a gargantuan task. 

Says Saville: “Do I think its ambitious? Absolutely. Building a bank in one country is hard enough.”

But by building a one-size-fits-all banking system called TymeX, made up of complex fintech assets, it aims to create a Lego-style set that can be implemented anywhere. 

“The ultimate goal of [TymeX] is that they will have all of the building blocks that are necessary for creating a bank in any environment,” Saville says. “Choose your country, they’ll go to their Lego set and they’ll bring the pieces back to launch the bank.” 

But is this practical? Each country has specific nuances and needs, and the world is littered with stories of cross-border banking deals that have fallen apart.

“Banking has not proved to be very internationally transportable,” Kooyman says. “It takes a lot of perseverance and capital.” 

Experts agree, however, that if it is going to work, it will probably do best across fragmented, emerging markets with common characteristics. And you have to be one of the top three banks in those jurisdictions to compete effectively. 

The shining success story is Nubank – the mega digital bank launched in Brazil that now also operates in Mexico and Colombia. It stands out as a great example of how retail banking can go global, under the right conditions. 

“It’s very, very digital. Their digital offering is very client friendly. And then they are often up against large banks that have either become fat or lazy, or haven’t updated their digital presence,” Kooyman says. 

While banking 131-million customers with no branches or its own ATMs, Nubank shows it is possible to be a wholly successful, fully digital bank. 

Its success lies behind its radical cost efficiency and in expanding into underserved markets fed-up with the traditional banking system. But its app is also world class and provides all the services you might need from a branch.

“The theory is that you learn a lot in one market and then you apply it to another market,” says Kooyman. The Philippines, for instance, has a fairly large lower-income market, and GoTyme can “transfer its knowledge” from banking the equivalent market in South Africa to Asia.

Will markets bite?

Unlike most of its South African counterparts, GoTyme is not currently listed on any stock exchange. It’s not unusual for a digital bank to be listed, but GoTyme has not yet taken the leap.

Ramontsha says that for now, the bank is relying on its “strong shareholder support”, but it is “actively working to be listing ready in the next three years or so”. 

Says Anthonyrajah: “I think investors would love to be able to invest in the promise [of it]. Being able to have exposure to that on its own as well, as the other markets that they have, like the Philippines, would be very interesting.” 

While GoTyme would look at a foreign market like the New York Stock Exchange (NYSE), it would be a boon for local investors were it to also list on the JSE. 

As it is, there is plenty of local interest in digital finance companies right now. Last November, the initial public offering of Optasia, which provides digital payments across Africa, was oversubscribed. Weaver Fintech, which also does the same sort of thing, has seen its share price rocket 120% over the past year.

“When they launched as a bank in South Africa, to propose listing at that point wouldn’t have made any sense,” says Saville. Now, however, he believes the company could probably benefit from the capital boost.

“The problem, particularly with the JSE, is that I’m not sure to what extent growth investments are appreciated here,” Anthonyrajah says. That is why a listing on the NYSE, which Nubank has done, or the Philippine Stock Exchange would make sense. 

Either way, investors see plenty of growth potential in Africa’s first profitable digital bank. The real test of its “phygital” model – and whether it is viable for the bank to live entirely online in South Africa – will lie in the success of its new consumer hubs.

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