Bank Zero turns a profit early and eyes lending and FX as next acts

How Bank Zero got to profit

Bank Zero hit profitability last month, co-founder and chair Michael Jordaan said, beating the December break-even date that Lesaka Technologies had penciled in. Jordaan, who led FirstRand Ltd.'s First National Bank for a decade, started mapping out a different kind of bank with Yatin Narsai years before the 2021 launch. Narsai, formerly the chief information officer at FNB and now Bank Zero's chief executive, helped shape a model that keeps fees at zero and builds almost all software in-house to keep costs lean.

Part of the earnings beat came from alliance banking deals that let fintechs, retailers and digital platforms issue cards using Bank Zero's rails. Jordaan also pointed to better merchant acceptance of electronic payments and fiercer fee competition as tailwinds for consumers.

The Lesaka deal and growth plans

Lesaka Technologies is set to purchase Bank Zero for 1.1 billion rand ($62 million). Regulators are expected to rule on the acquisition around year-end, the same period when Bank Zero anticipates feedback on its applications to offer lending and foreign exchange services.

As of today, the bank's client base stands at 275,000, spanning business users and high-net-worth individuals. Jordaan said the alliance model, combined with the Lesaka partnership, could add about 2 million more customers. To fund lending, the bank plans to tap its roughly 860 million rand in deposits alongside capital that Lesaka is likely to commit.

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Why the competition matters

"The race is heating up," Jordaan said, arguing that "the one thing we can conclude for sure is that the consumer will be better off." Insurers, retailers and telecom operators are pushing deeper into finance to squeeze more value from their customer bases and open fresh revenue streams, all against the backdrop of a South African economy that has grown at an average rate of under 1% over the last decade.

The bigger picture for your money

Bank Zero's origin story doubles as a playbook for low-cost banking: Jordaan and Narsai's rethink over red wine led to a fee-free model and homegrown tech to contain expenses. Jordaan also runs Montegray Capital, whose portfolio includes the crypto exchange VALR and Purple Group Ltd., which is behind the EasyEquities platform. Away from finance, he is involved with Bartinney, his family wine estate roughly 60 kilometers east of Cape Town.

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