Last week FNB went from being your bank to being your telco.
FNB unveiled one of the worst-kept industry secrets: it was launching its own cellular network, or more precisely a mobile virtual network operator, or MVNO.
The bank which has made its name using technology innovation – including cellphone banking and its eBucks rewards programme – and stole a march on its competitors with its fluid iPhone app, has done so again by becoming the first South African bank to launch an MVNO.
MVNO activity is increasing globally, says the GSM Association, “due to regulatory policy designed to increase competition and a growing interest in the MVNO market from ecosystem players such as ISPs and device manufacturers”. This includes messaging app WhatsApp, Chinese internet giant Alibaba and Xiaomi, the Chinese mobile maker that has leapt passed Apple to sell the most smartphones in China.
“MVNOs remain most prevalent in mature markets where penetration (based on connections) has surpassed one hundred percent. Europe is home to two thirds of domestic MVNOs (585), followed by Asia Pacific (129) and Northern America (107),” according to a GSMA report on MVNOs published in February.
“By contrast, the MVNO sector remains in its infancy in Sub-Saharan African markets with just eight MVNOs across the region.”
It’s a no-brainer for FNB to get into this market; and it has done its homework and took three years to plan and build it, says CEO of FNB Connect Ravesh Ramlakan.
It was an obvious extension of the previous offerings, which began with selling smartphone then tablets on monthly contracts to FNB customers (to enable them to do their internet banking thus making the bank itself more effective). FNB Connect also offered connectivity, including cheap ADSL data bundles as well as making calls through the FNB Connect app.
FNB was able to offer these data deals through its own economy of scale process, where it ended up over buying on internet capacity. At the time, it was a value add to its customers to provide them with cheaper data (and therefore make it easier and cheaper to use internet banking)
Before the launch this week, FNB had already sold over 100 000 cellphone contracts, over 285 000 devices since 2011, and over 2m people top up their airtime every month.
“Our strategy is to have our customers on digital,” says Ramlakan, adding FNB has 4m customers registered for cellphone banking and a million each on the banking app and online banking. “The customers are already there on our online spaces, we don’t need to migrate them.”
FNB CEO Jacquie Celliers says the bank did it because “our primary objective is to use the mobile offering as another way to add value to our customers’ lives. We aim to richly reward our loyal customers for banking with us, and also to further integrate our clients into the FNB ecosystem”.
FNB has partnered with Cell C, one of the smaller of the four networks, and the one that is prepared to leverage its network to gain market share.
Even with modest target of “a few hundred thousand,” as Ramlakan predicts, FNB will upset the status quo of an industry that isn’t used to such competition.
FNB Connect is offering fairly industry standard rates (contracts for R200, R500 and R1000 for the same number of call minutes, SMSes and megabytes of data) but it’s the Flexi-package and ease-of-use that Ramlakan is most proud of.
FNB online banking customers are familiar with the interface, which will now sport a “My SIM cards” tab next to “my accounts” and “my (credit) cards”. This lets you you add airtime, data, SMSes and see your balances for all your linked SIM cards.
THE MVNO market in South Africa changed slightly earlier this year with the launch of a MVNO aimed at the high-end of the market, called me&you and offering packages from and unlimited calling for R300 a month.
But the real story behind it is MVN-X, a company whose clients are would-be MVNOs and provides a platform (including billing and customer service) that enables MVNOs to focus on their marketing and dealing with their customers.
Until now to set up an MVNO required the kind of hard work FNB has just done, creating client management systems, integrating its billing and manage all of the minutiae of running a MVNO.
Enter Bailey, the former CEO of Virgin Mobile, the country’s first and longest running MVNO.
His MVN-X already hosts MRP Mobile, for clothing chain Mr Price, and buys data, call minutes and SMSes in such bulk that he can still on-sell them to his customers and all of them can make a bit of money.
FNB will also begin offering free smartphone app-to-app calling, similar to what is offered by Skype, Viber and Apple’s FaceTime; and recently by WhatsApp. It’s called VoIP, for voice over Internet Protocol, and is the way all future communication will be carried over data networks.
But FNB’s Cell C dependency has one significant disadvantage: no LTE. Cell C has yet to roll out this speed upgrade to its network, which is scheduled for later this year.
It’s a bold move for FNB and one that should be applauded for bringing further competition to the communications industry.