Shoprite Group, South Africa’s largest retailer, which also operates in Ghana, has quietly launched a basic transactional bank account linked to its Xtra Savings rewards cards.
With over 20 million of them in circulation under the Checkers and Shoprite brands, customers only need to register for the money market account to activate banking on their existing cards.
The money market account, which launched in August last year, has more than 530,000 customers, which the group says indicates “customers see its value.” The group has 24 million unique customers in South Africa alone.
Basic, no-frills account access is via the group’s mobile channels (via the Shoprite app, USSD or WhatsApp). Prior to last month, the account only allowed customers to deposit funds for groceries and pay utility bills.
Now, through a partnership with Grindrod Bank, customers can send money to others and withdraw money at the retailer’s stores. Registering an account is simple: an SA ID card or passport and mobile phone number are all that is required.
This account effectively operates on a regulatory framework designed for “portfolios”. This has less stringent Financial Intelligence Center Act (Fica) requirements – money market account does not require Fica registration.
There are, however, limits in place to prevent these types of accounts from being used for money laundering: account balances may not exceed 25,000 Rand at any time and there is a daily limit of 5,000 Rand each for them. cash withdrawals, cash deposits and transfers.
Linked to a cell phone
FNB used a similar approach to improve its eWallet proposition, extending it to the Easy Zero account (which basically works on the eWallet platform, but also comes with a card).
These limited accounts have one essential difference from a normal bank account: they are directly linked to the cell phone number of the account holder. This means that they do not interact with the national payment system, so they do not offer debit orders or EFT functionality.
Shoprite positions this as a positive on the account website, saying, “Your money is your money … no debit orders or deductions.”
The group has a hard-hitting introductory offer that allows customers to recoup R 10 for every R 100 spent in-store. The account has only one fee: R5 for withdrawing cash from the merchant’s cash registers. This is smart because it discourages withdrawals, keeping more money in its account ecosystem (and available to spend in store).
All other transactions – including deposits, sending money, in-store purchases, and prepaid airtime / electricity purchases – are free. At this stage, linked Xtra Savings accounts can only be used for purchases made in group stores. If an account has no activity for 180 days, a fee of R5 / month is charged.
The group is aggressively targeting companies that pay staff money at no cost on all disbursements. Floats are loaded, disbursed, and reported for free, and businesses will interact with a personal account manager. The group bears these costs to ensure it gets more money (digitally) into its ecosystem, as that means a higher likelihood of it being spent in its stores.
Jean Olivier, Managing Director of Financial Services at Shoprite Group, said: “The development and deployment of the account has been driven entirely by customer needs. They wanted a simple account that gave them full control over their money and didn’t surprise them with hidden charges.
Adding this feature to accounts has the potential to dramatically disrupt the market, especially at the lower level.
The group added the linked card functionality following customer feedback. He said that “customers like to transact with their phone, but also with a card, and some have expressed concerns about how to access their money market account if their phone’s battery dies or runs out of power. if they forgot their phone “.
Adding this feature to accounts has the potential to dramatically disrupt the market, especially at the low end. It could see economically active customers who currently depend on normal core bank accounts (like Capitec, new entrants and those of larger competitors) shifting some of their buying activity to this account.
Simple transactions like airtime purchases often incur charges (50c or R1) on many “normal” bank accounts. Transferring these transactions to the money market account will have a big impact on low-income people.
For those who depend on money from loved ones and have very basic transactional requirements (shopping for groceries, withdrawing cash), this is an even cheaper way to transact.
For the merchant, the transfer of purchases from customers of other banks to the Money Market Account has the obvious advantage of no longer having to pay interchange fees on these transactions. On a large base of active users, this amount will be significant.
Shoprite Group argues that although the Money Market Account has increased its banking functionality, it “does not intend to become a full-fledged bank, but rather to use its size, reach and technology to provide basic transactional banking services and solving basic transactional banking problems for its clients.
Becoming a bank would be a huge step for the retailer as it would require a license and that subsidiary would have certain capital requirements. It’s almost certainly off the table for the foreseeable future.
Much more interesting is what a slightly more comprehensive transactional bank account proposal might look like, still using Grindrod Bank’s license and technology.