For most, owning a wine farm on a mountainside close to the sea, surrounded by family and friends, would be all they ever needed. But for Michael Jordaan, former chief executive officer of one of South Africa’s biggest consumer lenders, the banking bug runs too deep.

Having moved to his wine farm Bartinney full time in 2014, after 10 years at the helm of FirstRand’s First National Bank, 49-year-old Jordaan is now readying Bank Zero, a digital bank that may offer some services for free. With its start date slated for the end of this year, Bank Zero is likely to epitomise Jordaan and his career thus far — innovative, consumer focused and kinda cool, at least to nerdy banking types.

“It’s a project that’s close to my heart,” Jordaan, who helped FNB win an award as the world’s most innovative bank during his tenure, said in a recent interview in Cape Town. “From a business perspective wine making is nonsensical, but it has the lifestyle. It’s now five years since I left FNB and at some stage you have to follow the thing that’s your passion.”

Bank Zero, which in January said it got a provisional license from the central bank and has 10 staff, isn’t going to lend out money. Instead it’s going to encourage South Africans to save through attractive interest rates. With a mutual bank structure, which is funded by its members, the Johannesburg-based Bank Zero is entirely backed by its founders and will offer customers with smartphones an app and a card.

Competitive Space

It comes as South Africa’s economy shows signs of improving with the swearing in of Cyril Ramaphosa to replace Jacob Zuma as head of state last week. Ramaphosa has already moved to end an impasse in the mining industry, while pledging to fight corruption that had become a hallmark of Zuma’s administration.

Bank Zero joins several new entrants encroaching on a space dominated by South Africa’s four biggest lenders. Discovery, the nation’s largest health-insurance administrator, plans to start this year, while billionaire Patrice Motsepe is backing Tyme, which will allow customers to access funds through their mobile phones. The South African Post Office also has a provisional banking license.

While Bank Zero will start small, it will be looking into cryptocurrencies, crowd funding, data banking, and blockchain technology to keep up with changing trends in the industry and beat out the more traditional lenders, Jordaan said.

Vociferous Debates

“I’m the chairman, so it’s more of a non-executive role with some interaction with the regulators,” said Jordaan, who won’t be commuting regularly to Johannesburg. “Bank Zero is very independent, it’s not linked to FNB. It’s possible to start a new bank with very few people and great software and costs at 1 percent of 1 percent of my FNB budget.”

Yatin Narsai, who was FNB’s chief information officer, is Bank Zero’s CEO. It was over bottles of red wine that Jordaan and Narsai hammered out the the Bank Zero concept. Together they face “world-class competition” from more than 30 registered banks in South Africa, Jordaan said, but with no canteen, no art collection, no legacy technology systems to wrestle with and some staff not yet taking a salary, all resulting in a low cost base, the two plan to shake up the local industry.

“He’s the person I’ve had the most fights with in my life,” Jordaan said. “We have vociferous debates. For Bank Zero, we’ve explored everything.”

Business Banking

While banks traditionally make money by lending, Jordaan’s start up will rely on other revenue streams. Without elaborating on specifics, he pointed out that some lenders profit from the different rates on wholesale versus retail funding, charging interchange fees or taking a commission on the sale of certain products, such as airtime for mobile phones. And in addition to consumer banking, Bank Zero wants to enter business banking.

“I’m involved with 21 start ups and I’ve realised how expensive banking fees are — businesses pay too much,” Jordaan said. “There’s billions of rand in over-payment for bank fees. Imagine if we could help save those billions.”

In the vineyard-strewn valleys around Jordaan’s farm there are a number of his former colleagues and mentors. FirstRand founders GT Ferreira and Paul Harris both own wine farms in the area. Before announcing Bank Zero Jordaan spoke with them, worried that his latest project would be seen as a threat to their legacies. Instead, Jordaan said, they gave their blessing.

In a 2012 interview, Jordaan said the business of wine had bad cash flows and no return on equity. While his views haven’t changed, he’s still passionate about his farm. His grandfather owned it first, but it was sold after he died. Having built up his wealth as a banker, Jordaan was able to buy it back and Bartinney produced its first grape harvest in 2009. He talks about wine farming with the same enthusiasm he has for banking.

“As my wife says, vines are like men, they’re better when they suffer,” Jordaan said. Alluringly, and unlike banking, “wine is tradition, it’s not prone to innovation,” he said.

© 2018 Bloomberg