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With hip hop and bumper home loans, big banks target South Africa's youth
* South Africa's big banks have ageing customer bases
* Trying to lure younger customers with cut-price accounts
* Move comes as they face competition, sluggish economy
By Emma Rumney
JOHANNESBURG, July 15 (Reuters) - South Africa's biggest
banks are betting cut-price accounts, big mortgages and offers
on everything from Adidas backpacks to Xboxes will help them win
over the youth market, which many overlooked until it was
targeted by a host of start-up rivals.
An ageing client base and competition from old and new,
tech-savvy rivals with lower-cost offerings have forced the big
four banks to drop their fees and invest in propositions that
especially appeal to upwardly mobile youth.
Absa is considering offering first-time buyers a
mortgage worth more than the value of their home, while
FirstRand will launch a no- or low- monthly fee account
They join Standard Bank and Nedbank in
weighing more mortgage risk or accepting lower fee revenues in
order to attract younger customers.
All four are being thrashed in the youth market by rival
Capitec, which serves around 45% of the 15-24 year old
market and over 40% of 25-34 year olds, according to an estimate
of the banks' market shares based on a 2017 Publisher Audience
Management Survey (PAMS) provided to Reuters by market research
Newer lenders like TymeBank are also threatening to lure
even more young customers with fee-free, app-based banking.
Executives at Absa and FirstRand said that while not
especially profitable, the youth market is key to the
sustainability of their customer bases.
"It's not about the numbers per se but it's about finding
the right customers that are upwardly mobile and attractive in
terms of the strategy," said Christoph Nieuwoudt, head of
consumer banking at FirstRand's retail unit, First National Bank
The lender had previously left a "huge gap" in the student
market but wanted to make a comeback, he continued. FNB said its
new student offering would combine a digital account, bundled
mobile data, deals on third-party products and services and
either low or no monthly fees.
Analysts said the banks appeared to be waking up to the fact
that a number of their customer bases are skewed towards older
age brackets, and if they do not start attracting younger
clients again they would have to wrestle them away from rivals
later or quickly lose relevance.
"The same thought process seems to be playing out at all the
big banks," Ilan Stermer, banks analyst at Renaissance Capital,
Based on responses to the PAMS survey, which asked
participants which banks they had an account or card with,
around 34% of Absa's customer base is 50 years old or older,
compared with 24% at FNB, 25% at Standard Bank and 26% at
Absa, which already offers a low-fee student account, is
planning to launch a mortgage product aimed at customers in
their early- to mid-20s in the third quarter, Geoff Lee,
managing executive of home loans in its retail unit, said.
As part of this it could offer - with strict criteria -
mortgages worth more than the house itself to cover transaction
costs. Standard Bank, which started offering an account aimed at
16-23 year olds and combining banking and "lifestyle" offers
last year, has also recently started offering mortgages worth
104% of a house's value to certain first-time buyers.
The moves follow Nedbank's April launch of a digital, zero
monthly fee account aimed at under 25s, promoted by a local
rapper, and offering career help, DJ and photographer bookings,
and deals on everything from fashion and technology to
For years, the big banks have struggled to grow lending in a
weak economy with high levels of household debt. But with
players like TymeBank growing fast - it acquired 400,000
customers in four months - executives said the youth market was
too important to pass up.
"You can't have a customer base that dies on you," said
Cowyk Fox, managing executive of everyday banking at Absa,
adding that the youth market is growing fast and has better
opportunities two decades after the end of apartheid.
(Reporting by Emma Rumney; editing by Emelia Sithole-Matarise)
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