South Africa’s Absa bank, a subsidiary of Barclays, has introduced no-frills branches in an effort to service the entry level banking market.
The brightly coloured, “funky”-looking outlets is a big step away from the lender’s traditional banking halls. Absa only offers a limited number of products at the new outlets. Internally the bank refers to them as ‘1234’ branches because of the four basic product classes available – transactional, savings, loans and insurance. “The demand for simplified banking for the entry level segment – including youth and students – is fast-growing,” said Absa in a statement.
Lawrence Twigg, managing executive of Absa’s entry level and inclusive banking, explains that the concept behind the new branches originally started in 2006 when the bank re-entered the microlending arena. “We developed a concept called Absa Loan Centres. We recognised that the market was looking for an environment where they could . . . apply for a loan and it wasn’t complex and it wasn’t as intimidating as the traditional branches,” says Twigg. The Loan Centres proved to be a big hit. Although they only accounted for 8% of Absa outlets, they were responsible for 32% of total lending sales.
On the back of the Loan Centres’ success, Absa decided to take these branches to another level by adding more products. “We said, let’s take a Loan Centre, but let’s add to it. Let’s add a transactional debit card. Let’s add savings products. Let’s add insurance. And in the future, maybe we’ll put in an affordable housing product. So that is how these branches came about,” Twigg explains.
Absa has so far converted nine of the original Loan Centres and three of its traditional outlets into the new entry level branches, bringing the current total to 12.
No-frills banking is, however, not new in South Africa. The concept was largely popularised by Capitec, which introduced innovative use of technology such as fingerprint biometrics and photo identification to streamline paperless branch processes and make in-branch transacting easier. General manager of entry level banking at Absa, Edmond Jeneker told Moneyweb that the new branches are not a response to Capitec as Absa already has a sizeable number of low-income clients that it catered for. According to Twigg, Absa currently has 7 million customers in the entry level category.
Twigg believes this new approach is in keeping with the ever-changing economic times as well as emerging trends across the financial services sector.
Absa is also using the new branches to educate its entry level clients. With the help of a touchscreen terminal, clients are trained on how each of the products on offer work.