FNB targets South Africa’s growing solopreneur market



CIARAN RYAN: There’s a growing body of evidence showing South Africans are opting for self-employment, or what might properly be called [being a] ‘solopreneur’. By some estimates there are four million self-employed or independent workers in South Africa.

Now, from a traditional banking point of view, they are shoehorned into products that are not always what they need. They have to choose either a business or a personal account.

FNB is changing that with its solopreneur platform that manages both personal and business finances through a single banking profile, without having to register separate accounts.

Well, to explain this, we’re joined now by Mohamed Choonara, head of product at FNB Private Core Banking. Hi, Mohamed, thanks very much for your time. Let’s kick off and just explain the solopreneur market and how FNB is addressing it.

MOHAMED CHOONARA: Thanks, Ciaran, it’s great to be here. I think the story started when we noticed that the number of freelancers and entrepreneurs were growing faster than salary earners. We have access to that level of data at the organisation.

[It is] estimated that 4.4 million South Africans are earning a living through a salary that they generate for themselves.

It’s quite remarkable. We must celebrate these individuals. And we think 1.5 million of them are these solopreneurs, or businesses-of-one owners. What’s important also is that these stats are for the formal sector.

We do expect the informal sector entrepreneurs to be far more significant, and there’s a lot of work underway to quantify that. The solopreneur solution that we’ve created at FNB works well for both formal and informal sector entrepreneurs, as most individuals begin their entrepreneurial journey, if you think about it, informally as a business of one.

Before they can afford employees or get premises these individuals operate as sole proprietors with no formally registered business.

As a result, what we’ve noticed from a banking platform perspective is that these solopreneurs make use of their personal bank accounts for trading, rather than traditionally where clients would set up a separate business account.

This works fine as long as you can track your business performance separate from your personal account for tax purposes. Clients in this, these solopreneurs, tend to use their personal accounts for business and personal.

Some of the key client profiles or client types that we’ve noticed are independent practitioners, doctors, lawyers and consultants.

We have artisans, plumbers and electricians who make use of this type of platform. Goods traders and bakers selling vetkoek also tend to do this. And the growing base of clients that we’ve noticed are side hustles, where salary earners look for additional income.

CIARAN RYAN: It’s interesting that you bring up people who [have] a side hustle, because there are a lot of people who’ve got jobs, and then maybe in the evening they have a little side business that goes on. They’re selling products through Amazon or whatever.

That introduces some complications, does it not, when it comes to banking, because you are getting this mixing up of personal and business. So maybe talk about some of those complications.

MOHAMED CHOONARA: Yes, exactly. So with this changing trend, where our personal banking customers, Ciaran, are now earning income from multiple streams, as you mentioned.

These streams could be a salary, a mixture of a salary and trading income, or just be trading income that comes into these personal accounts now.

Now we’ve developed this unique bundle because we understand there are unique customer needs at play here.

This unique bundle is almost a one-stop shop for solopreneurs, where we’ve combined the best of both worlds when it comes to personal and business banking.

So in this offering we include a personal account, a credit card for qualifying customers, a free business account that you’d consider using to separate your activity when you are ready.

Access to merchant solutions, the Expedia app, turns your smartphone into a merchant device, or the Speedpoint Go device at R699, which is a very good offering from FNB as well.

So we’ve combined the best of personal banking and business banking for these clients who tend to mix these activities as well.

CIARAN RYAN: So a solopreneur, somebody who’s self-employed or somebody who has a side hustle – should they be separating their personal and their business accounts? Maybe just explain how you do that.

MOHAMED CHOONARA: I think it’s very tempting for solopreneurs to use one account for personal and business trading. There’s a cost saving on bank fees, it’s a little easier to manage, and you have one set of banking details to provide.

But I guess in the long term when you need to pay taxes and when you go to your content, you are always going to be asked to do a whole lot of work at the end of the year to separate your activities.

Sometimes that’s done on a spreadsheet, but I think it’s always better for clients to split their activity upfront and keep their personal income and expenses separate from their business income and expenses.

It also allows them to evaluate how the business cash flow is performing and how the business profits are performing – which is important for accounting purposes, and it gives you a sense of where you need to invest to grow your business.

So what we offer in this platform is a combination of a personal and a business account. We offer both so that clients have access to the business account and, when they are ready, they can split their activities.

What’s also important is that the business account that we add into this offering doesn’t require you to formally register your business. You can set up that business account with your ID number.

It’s a ‘sole proprietor’ business account, but it just allows you to split activity between your personal expenses and income and your business expenses and income – which is always healthy for long-term sustainability of your business.

CIARAN RYAN: Right. Now a lot of people in the informal sector might not want to register as a formal business, so there is a pathway there where they can migrate from the informal to the formal sector by the sounds of things.

MOHAMED CHOONARA: Yes, it’s exactly the case, Ciaran. Thank you. And if you take up the solopreneur offering, you don’t need to register your business immediately if that’s not part of your business development plan right now.

The solopreneur offering allows you access to a business account which can be opened up with an ID number. It’s a ‘sole proprietor business account’, so you can use that without formally registering your business.

What it allows is for you to separate your personal and business activity without changing your ownership type or structure.

What’s important is that in this bundle of value that we’ve created we are already solving for the pain points.

So we give you access to merchant solutions, as I’ve mentioned, a speedy app and a ‘Speedpoint Go’ device at R699. We also include a cash bundle, which allows you to deposit cash for free up to a certain value.

As we understand, these entrepreneurs sometimes need to take in cash out of necessity, and we also offer the same point of contact for personal and business needs.

When you’re on the solopreneur offering, we won’t ask you to phone another number for business banking. Our personal teams can assist you with your personal and business needs when you take up Solopreneur.

CIARAN RYAN: Right. So is this person able to convert his phone into a something like a point-of-sale device for taking card transactions and that sort of thing?

MOHAMED CHOONARA: Yes. For now we’ve got a solution called Speedy App, which you can download via the FNB banking app when you set up an FNB account, and you can literally use your smartphone to accept payments. So now it’s available on Android devices and it’s a fantastic solution available on the FNB app.

CIARAN RYAN: This does seem to be quite an interesting development in the banking market that FNB has developed – where the solopreneur is being targeted as a very specific market.

Maybe just talk about where you think the future of banking is going as I am addressing this particular market segment.

MOHAMED CHOONARA: Yes. What we’ve noticed here for the last few years is that the number of freelancers and entrepreneurs are growing far faster than salary earners.

And if you think about that, in the economy in the South African context there are far fewer employment opportunities available and clients sometimes out of need are having to start businesses.

If you think of the informal economy, a lot of these individuals have to start businesses out of need.

A lot of individuals in the formal sector also need to start side hustles, because sometimes their salary income isn’t enough to keep them going.

A lot of them have passions and hobbies and they want to start businesses.

So we at FNB have recognised this, and we’ve noticed that when we looked at our customer base data and our customer base trends that come out every year, our market share views, we can see that there’s a growing number of freelancers and entrepreneurs, and they seem to be growing far faster than some of the others.

So we see a very, very significant opportunity in solving for entrepreneurs. Some of our competitors as well are solving for these clients, and competition is always great in the industry.

And, like I said, we have 4.4 million South Africans who we know are now earning a salary and an income that they generate from themselves, which is truly remarkable.

CIARAN RYAN: I’m sure we’re going to see some growth in those figures over the next couple of years as well.

We’re going to leave it there. A very interesting development in the banking market. That was Mohamed Choonara, head of product at FNB Private Core Banking. Thanks very much for your time, Mohamed.

MOHAMED CHOONARA: Thank you, Ciaran. Thanks a lot.

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