Old Mutual banking on Gen Z for growth

Old Mutual Bank is going after the Gen Z demographic as it seeks to aggressively grow its customer base and attract 2.8-million clients by 2028.

Making a presentation to investors and analysts at the insurer’s Capital Markets Day in Cape Town on Tuesday, Old Mutual Bank CEO Clarence Nethengwe said the bank now had 150,000 clients — 30% of whom were under the age of 25. The bank is expecting this figure to keep growing as it is signing up customers at a rate of 5,000 a day.

In a light moment, Nethengwe said his son had advised him that to attract Gen Z clients the bank perhaps needed to ditch the “Old” label and rebrand itself as just Mutual Bank. However, he added, there was no need for such a renaming as the Old Mutual brand had proven strong and trustworthy enough to attract younger customers, who were also taking advantage of the rewards programme on offer.

“I don’t need to take the word ‘Old’ out because it’s an amazing brand. The young people are voting with their wallets and coming over to us,” he said.

Soft Launch

Old Mutual applied for a banking licence in 2022, before building core systems that were completed in 2023. It has invested R3bn to get the project off the ground. The phased rollout began with a soft launch to around 600 internal staff members to test the app and refine systems.

In August, the bank was expanded to the insurance giant’s existing Money Account clients. Between July and October, it grew from roughly 5,000 to 150,000 new customers.

The bank plans to turbocharge this growth by tapping into Old Mutual’s finance division, which has 346 branches countrywide, a sales force of 2,200 and a R15.5bn loan book.

The first target is the 500,000 existing Money Account holders who will be slowly migrated to OM Bank over the next year. The Money Account division has 500,000 clients, 400,000 of whom have active transaction and savings accounts, and R1.5bn in deposits.

Nethengwe said the OM Finance branches are strategically located at taxi ranks and malls around the country and receive 3.4-million visits annually, making them ideally located for the bank’s target market.

“We are strategically located to support mass market and middle-income customers,” he said. “If you look at us versus the traditional banks and insurers, we are probably the one insurance business that has more branches than our traditional competitors in this space.”

OM Bank seeks to combine banking and insurance as an attractive proposition for potential clients, having targeted broad income ranges, from those earning R8,000 a month to the affluent who command R80,000 a month.

But the immediate focus is on signing up as many Gen Z clients as possible, as Nethengwe wants to see them grow with the brand.

“The strategic intent is to attract younger customers and change the demographics of Old Mutual,” Nethengwe said. “I’m quite convinced that we are going to sustain that into the future, and it will give us a massive benefit.

“Any business that does not attract young customers is doomed to fail along the way. That 25-year-old, down the road, is the one who has got money and is going to sustain your business. So if you are not attracting them today, they won’t have any affinity whatsoever with your brand.”

Old Mutual’s rewards programme — whose partners include Makro, DisChem, KFC, TotalEnergies, Shoprite Checkers and Takealot — already has 3-million members signed up. Nethengwe said the rewards, which can be redeemed for cash, were an attractive proposition, especially for younger customers who will be earning points on daily transactions.

“It’s a flywheel that’s going to give us a massive push in terms of growing our business,” he said. “They can redeem the points into their own bank accounts, and this is something which is very popular with the young ones.”

Customer data

Customers can also use the redeemed points to pay for their insurance premiums.

Over and above the R3bn investment, the company expects to make annual losses of between R1.1bn and R1.3bn, but to reduce these gradually and eventually break even by 2028 with 2.8-million active clients.

Nethengwe said the bank was also tapping into the Old Mutual ecosystem of 7-million customers across its insurance and other businesses in search of new customers for the bank. It is counting on the fact that South Africans often have multiple bank accounts.

“We are not naïve, we know the 7-million [customers] within our South African customer base are already banked by someone else. However, the most interesting thing is that South Africans are multi-banked, and this provides an opportunity to bank those who already trust us.”

Growing the bank, he said, would offer Old Mutual deeper insights into customer data crucial to compete in the segment they are targeting, which is dominated by Capitec — which has 24-million customers and is the market leader — and includes the traditional big four and newer entrants such as TymeBank, Discovery Bank and Bank Zero.

“I’m a retailer, and I’m obsessed with customer data. You can’t win against the big boys if you are not obsessed with customer data,” Nethengwe said.