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Just over a year after taking the reins as CEO of Sasfin Holdings, Michael Sassoon cuts a pretty relaxed figure.
In fact, he’s very recently added the head of the group’s banking pillar to his overall corporate responsibilities following the retirement of Roland, his father, who founded and built Sasfin over a period of 50 years.
That sounds like a tough act to follow?
“It’s been a great experience, and challenging,” says Sassoon the younger from Sasfin’s Johannesburg offices.
Now, however, the bank is going through cultural change as it adapts to life sans its founder, described by Michael Sassoon as “a force of nature”.
“He’s what I’d call a real entrepreneur: a huge amount of flair, quick decision-maker, very engaged, very involved in every decision ... But I think what we need for our next stage of growth is something that’s a bit more empowering, if that’s the right word?”
Consensus-driven?
“More consensus,” replies Sassoon.
“And also, I suppose, it’s the world that’s changed. Maybe people want a bit more space to lead. That’s probably part of what’s happening over here, part of the shift.”
The firm’s recent interim results showing in March represented a return to form: no mean achievement given the underwhelming state of the SA economy.
Headline earnings were 60% higher and the group’s credit book was improved.
On the downside, costs grew faster than income which is a metric Sassoon says occupies his mind.
It’s worth acknowledging, however, that there’s an expense to evolution.
Sasfin is, for instance, responding to the relentless advance and demands of fintech across all its traditional pillars.
It’s also striking out in a completely different direction by signing a joint venture in which it is attempting to add some of the unbanked of SA’s economy to its client base.
It’s bold for Sasfin and something of a holy grail for the country’s banking sector.
In early March, Sasfin announced it would team up with the Hello Group in an effort to jointly offer transactional services to Hello Group’s client base, first established about ten years ago when it began life as one of SA’s first mobile virtual network operators.
Hello Group is now one of the top three sellers of Cell C, MTN and Vodacom to an original base of clients in the migrant workers sector.
The venture, known as Hello Paisa, is an important departure for Sasfin which, under the thrall of Roland Sassoon, was a business firmly rooted in wealth client depositors.
In fact, Sasfin only truly adopted a transactional banking capability about five years ago.
Sassoon says the interesting thing about Hello Group was that, in addition to its international mobile calling capability, the company had also added a money transfer business.
The idea, therefore, was that by using Sasfin’s transactional banking infrastructure, the partners could bring services to an under-serviced market quicker and at less cost – and suffice it to mention far less regulatory pain – than an entirely new entrant to the sector might encounter.
Says Sassoon of Hello Group: “They’ve managed to build the trust of a huge number of people for cash and, therefore, it was quite natural for them to now offer banking to those clients. They didn’t want to go through the rigmarole of getting a bank licence and falling under the prudential authority. We’ve got all of that.”
For Sasfin’s part, it didn’t have to worry about how it was going to distribute to this new segment, or what product it would sell or even how it was going to take the offering to the segment given the presence and track record of Hello Group.
Hello Paisa is a partnership more than three years in the making, and one that Sassoon says will contribute to Sasfin especially as the user base was less than 350 000 when the group first started modelling the option.
There’s a cross-border market, but there’s also a potential market in SA itself.
Sassoon expects the business will grow.
“So that was our decision, which gives us the opportunity to leverage our cost base, to leverage a full infrastructure that we’ve already built into a segment of the market which desperately needs some kind of innovative banking offering with a party that really understands financial services,” he says.
Sasfin will be ‘knocking heads’ with business titan Patrice Motsepe whose TymeBank is, in similar vein to Hello Paisa, attempting to crack the unbanked sector of the SA economy.
Discovery Bank represents a further liberalisation of SA’s financial services sector in a broad industry development Sassoon welcomes.
In his view, the entry of new banks has been a long time coming and stems from the near disappearance of the small banking sector in the late 1990s, a process wrought by buy-out activity, crisis, or a combination of both.
Older readers might remember any one of 32 banking brands including Saambou and BoE.
For a good chunk of the last two decades there have only been about 12 locally registered banks in SA including the big four, the mid-tiers such as African Bank and Capitec, as well as banks that have grown out of a larger parent organisation such as Bank of Athens and Mercantile.
The preference during that period was for large institutional power until, of course, the 2007/08 global bank crisis – the period in recent economic history that gave rise to the notion of systemically important financial institutions.
These were the banks the system couldn’t afford to fail.
In Sassoon’s view, the emergence of the ‘challenger bank’ is a global phenomenon and is a response to the global finance crisis.
“What’s happening today, globally, is you’re seeing challenger banks. In the UK, it’s been very prevalent, and the regulators globally are trying to create an environment in which there will be less concentration of risk,” he says.
There are, however, problems with the rate of growth of challenger banks.
Granting banking licences to the likes of TymeBank and Discovery is “a really good step”, but it doesn’t go far enough, he says.
“The regulatory framework by and large is a one-size-fits-all framework so they haven’t yet, unlike other countries, been able to create their two-tier approach to regulation,” says Sassoon.
“Obviously, as a small bank we would like to see some deregulation for small- to mid-tier banks which I think would be good for the country, bring more competition, create a more level playing field and ultimately, the consumers and businesses will benefit ... That isn’t the case at the moment.”
As a means to prevailing through these economic cycles as a ‘small’ bank, Sasfin has tended to focus on what it’s best at: an understanding of niche and the importance of being client-centric in a way that large institutions cannot.
This will continue for Sasfin and is especially true in the SME sector where Sassoon thinks the company has a competitive advantage, SA’s poor economic growth rate notwithstanding.
Small businesses that may have hit a difficult year and might be in need of R10m or R20m in facilities might not fit “the formula” a large bank considers essential to that firm’s bankability.
“But actually, if you spend a bit of time trying to understand that business, you can bank it,” he says, adding that Sasfin doesn’t need thousands of those clients to grow.
“If we took on 50 of those in the next year; or 40 of those in the next year, we grow our loans and advances book by 15%,” he says.
“Because we are a relatively small player in a very big environment, we actually don’t have the luxury of complaining about growth as an excuse because there’s enough market share to be taken in those spaces to generate decent growth, even in an environment where there is limited growth.“That’s how I see it.”
This article originally appeared in the 18 April edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
