Old Mutual Granted Approval to Establish New Bank in South Africa

South Africa’s second-largest insurer, Old Mutual, has received approval from the country’s Prudential Authority (PA) to establish a new bank, subject to certain licensing conditions.

The PA, which falls under the South African Reserve Bank, has granted Old Mutual the necessary section 16 approval to set up the new bank, which will be called OM Bank. This approval marks a significant milestone for Old Mutual as it transitions from the “bank build mode” into a rigorous industry testing phase.

Once OM Bank successfully completes the testing phase and integrates into the National Payments System, it will be poised to launch and compete in South Africa’s mass retail banking market. This market is currently dominated by Capitec, which has over 21 million customers.

Old Mutual CEO Iain Williamson expressed the company’s excitement about the regulatory approval, stating that it “affirms our progress in building the integrated financial services business of the future.” The insurer has already invested R1.75 billion to build OM Bank’s core banking system and has committed an additional R800 million to further develop the new lender ahead of its planned public launch before the end of 2024.

OM Bank will initially target Old Mutual’s existing customer base of 3.1 million individuals served through its Mass and Foundation business cluster, which caters to low-income and lower-middle-income earners. Williamson described these customers, which include salaried workers such as police officers, teachers, and nurses, as the new bank’s “targeted ‘center of gravity.'”

The approval granted by the PA allows Old Mutual to proceed to the next critical stage in establishing the new bank, which will involve a strict and rigorous industry testing phase. Upon successful completion of this testing, OM Bank will fully integrate into the National Payments System, paving the way for its public launch.

The introduction of OM Bank is expected to bring new innovations and solutions to the South African financial services landscape, which has historically been dominated by a few major players. Old Mutual’s foray into the banking sector is seen as a strategic move to diversify its offerings and better serve the needs of its existing customer base, as well as attract new clients in the mass retail banking segment.

Overall, the Prudential Authority’s approval for Old Mutual to establish OM Bank represents a significant development in the South African financial services industry. As the new bank progresses through the testing phase and prepares for its public launch, it will be closely watched by both consumers and industry observers alike, eager to see how it will impact the competitive landscape and bring new options to the country’s banking market.