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TCS | Kartik Mistry on Standard Bank Connect and SA's MVNO industry

Kartik Mistry, recently appointed head of Standard Bank Connect, believes there is still strong growth ahead for South Africa’s mobile virtual network operator (MVNO) market. Standard Bank, which recently rebranded its MVNO from Standard Bank Mobile to Standard Bank Connect and shifted its network partner from Cell C to MTN South Africa, has launched a new value proposition in cellular communications for its customers. TechCentral editor Duncan McLeod is joined by Mistry on the TechCentral Show, where he explains the bank’s decision to partner with MTN and why it decided to engage directly with a mobile network operator rather than working through an “enablement” partner as it had done previously. Kartik, who has experience in both telecommunications – he has previously served as chief operating officer at Rain – and in banking, talks about the state of the MVNO market in South Africa, where Standard Bank Connect is positioning itself strategically, and why the market might be primed for consolidation. Don’t miss the discussion!

Duration:: 25m
Broadcast on:: 26 Jun 2024
Audio Format:: aac

(upbeat music) - I'm Duncan McLeod and this is the Tech Central Show. TCS is brought to you by MTN Business. You can find out more about MTN Business. At mtnbusiness.co.ca and we thank them for supporting the show and allowing us to bring you these great interviews. And we've got a great interview coming up next. We're gonna be talking about MVNOs or Mobile Virtual Network operators. It's a market that was static for quite a long time in South Africa with only one player Virgin Mobile. But in recent years, it's really started to version and we've seen particularly banks and retailers, but also other industries getting into the MVNO market. And one of those brands and one of the early players in the MVNO market was Standard Bank, which launched a standard bank mobile. - Kotik, you are the head of Standard Board. It's now Standard Bank Connect. How long has Standard Bank been in MVNO now? When did it originally launched? - So Standard Bank launched, Standard Bank mobile launched in 2018. So we've been in the market since then. - Okay, okay. Kotik mystery, you are the head of Standard Bank Connect. There's a lot going on in the MVNO market. And I think partially as a result of eCAS of the communications regulator when it was a wooding spectrum a couple of years ago, telling the operators that well, actually they have to host MVNOs now because not all of them have. And I think that's leading to more competition in this market. And I want to unpack that in some detail. But before we go there, tell me a little bit about yourself. You've got experience in both banking and telco. - Yeah, that's correct. Started off actually in Standard Bank many moons ago as a simple business analyst. Worked at the Turquoise Bank F&B for a while. And at F&B was instrumental in launching that at that time the iPad deal that took the market by storm. I was in banking at that point in time product ownership. But we wanted to solve a specific problem and we saw technology and this model of offering telco type of services that could solve a problem for our transactional base. If we had a great trajectory at F&B and then joined Michael Jadon at RAIN, where we launched RAIN mobile or RAIN directly at the time. So I set up the offices in Cape Town and there's a chief operating officer for RAIN at that time. Great learning curve, you know, moving away from banking and pure telecommunications, but in a startup sort of environment. - Yeah, it was quite exciting. - It was very exciting. You know, and you do everything as a startup. And then post RAIN, I joined, well, I started my own entrepreneurial stint and learned a few lessons in that journey, which was about a three year journey as well. And then recently was approached by Standard Bank. There was an opportunity to head up Standard Bank mobile at the time. And they were looking for this hybrid type of personality, somebody that understands banking, but understands the telco market really well to come in and have a look at sort of Standard Bank mobile and what we could capitalize from the opportunity in the market itself. - Okay, well, it's start with the name change. You've changed it from Standard Bank mobile to Standard Bank, connect. What is the thinking behind that? - Yeah, and it's an interesting one and these types of changes happen with the most simplest things, right? So if you think about banking, a lot of our customers were looking at Standard Bank mobile and getting a bit confused between mobile telecommunications or are you the mobile banking app? So that's where the original, you know, sort of thinking came from. But we took the opportunity to really rethink what connectivity would mean for a typical Standard Bank customer. And we went through a long journey and, you know, did a couple of interviews and tried to get a lot of insight in terms of what customers were looking for and what would resonate with customers. We went a bit left field and tried creative names. But then we found that connect as a name itself resonates in the market. We see a lot of MVNO's, you know, leveraging connect and it's become a category, right? So you've got mobile operators and then you've got this connect name that really speaks to this MVNO market. And we wanted to call it for what it is. You know, we wanted to be clear and direct to customers. And then we wanted to leverage, of course, the fact that we're at Standard Bank, we have such a strong brand and that's where Standard Bank connect came in as a value proposition. And the timing was perfect because we were also re-platforming and rethinking our integration partners from an operative perspective. - Okay, well, let's talk about that next because when you launched, you launched on the back of cell-season network. - Correct. - There was only one player in town when you launched at the time. And that was cell-c, - Subsequently, the market has opened up to some extent and MTN seems to have emerged as the next big MVNO platform operator in South Africa. What drove your decision to switch? - Yeah, and I think, I mean, a bit of history, right? I think there's two components of making the switch. One was historically Standard Bank mobile, you know, a lot of the capabilities set with what we call an enabler and an aggregator. So we outsourced a lot of our capabilities, right? So if you look at the typical value chain when it comes to telecommunication services from the specific towers right up until sales and marketing, Standard Bank mobile was really involved in the sales, marketing and some product development into our component. The crux of the services was leveraged through their enabler. So as Standard Bank, we started thinking about how serious do you want to get into the telecommunications game? And there was this re-platform decision that we wanted to make, so bring the capability in-house. And the second component was then to say, if we on this journey, who do we integrate with? For both, re-platforming as well as integrating our wholesale services, you know, being a bank, we went through a thorough RFP process. There were strict sort of guidelines in terms of what we are looking for. So for the re-platform and for the integration into MTN, MTN came out strong in terms of meeting our needs. And at that time, Salzi was also on their journey of, you know, moving some of their capabilities across to Vodacom MTN. So we wanted to bypass out of the middleman and get straight into MTN. And it was a great journey and partnership that we have with MTN. - Okay. So I said previously, we're through an enablement partner. We're now working directly with the network operator. Does that add more complexity to your side of things? - Most definitely, and there is that trade-off. So as Standard Bank, we had to, you know, again, re-think. If we're gonna play this game in telecommunication services, are we gonna play the value added game where we, you know, where we're just offering some loyalty sort of component to customers? Or is there a real business case that we can take on? And based on, you know, what's been happening in the market, the cost of technology, cloud capability, even integrating into the M&O, the business case really stacked up to say that we can monetize this business, but bring the capability in-house. And that again means that we have to understand what capabilities the bank has and what it doesn't have and what we had to build. So yes, it did involve a lot more complexity. We now take ownership of the full value chain, except for the core network and the radio tower. So we do building, we do, you know, CRM, we do all that capability now. As Standard Bank connects, it's with Standard Bank. - Obviously, you felt the advantages of that extra administration were worth it. - Absolutely, and I think it's around driving innovation of product, getting to market quicker, how can you scale quicker to the base of customers that we have, and it makes total sense to us, yeah. - Okay, who are Standard Bank connects customers? - So right now our customer base is really our transactional base of customers. So if you want to be a Standard Bank customer, you have to have a transactional bank account with us. Standard Bank connects, and we're discussing sort of MVNOs and MVNO growth, and we understand that internationally, MVNOs really try to serve niche markets, right? And I think the bank has a privilege of a large segment of customers that we can decide, you know, how do we carve out specific niches that we can serve? So Standard Bank Connect right now serves a digitally savvy customer. We're looking at sort of the model to upper affluent base of customers that we want to service with, you know, that have digital access that can get, you know, great deals in terms of connectivity solutions. So that's the base of customers that we're targeting. - Okay, so no plans to expand that beyond the Standard Bank, transactional banking base. - I think over time, I mean, you know, what we do is we take everything as a business case. There's certainly value that you could extend if you extend it out of banking, but I think we'd want to crawl first and understand what we can do for our existing customers. And that's, you know, that's objective of the pilot is to say, join the journey with us. Let's, you know, let's build meaningful products together rather than trying to put products in front of you. And if it makes sense to expand it beyond that, you know, we would consider it over time. - Okay, okay. Now, is Standard Bank Connect operated as a standalone business with its own P&L line, et cetera, et cetera? Or was it seen more as a division of the bank that is going to drive customer loyalty to the bank brand? What is the focus thing? - It's a great question. And I think, you know, even given my history, I think there was always the conundrum when it comes to these types of businesses. Are they an enabler or are they a standalone business? So Standard Bank Connect is a standalone business. But we understand that we operate within the confines of Standard Bank. We stand on the shoulders of Standard Bank. And if Standard Bank wins, we win if we win Standard Bank wins. And that's also, you know, part of the naming convention to connect. And it's really just thinking around one plus one equals three. So a customer would gain a lot more value by keeping their services within Standard Bank. But as a business unit itself, we, you know, we've been through the business case. We've been through understanding the opportunity size. And we know that there's this MB&O growth that we're expecting and the potential that we can capture within the market. So we operating as a standalone BU with a P&L. - Okay. - And so what does that mean for your ability to be flexible when it comes to pricing? - Yeah. So naturally, you know, our base products has to stand on its own two feet, right? So, and that's what we build. And again, from a commercial perspective, it makes sense. And the opportunity is clear. If we want to do additional services for our customers, there's always that opportunity. And then that's funded through the bigger program of the bank. So if there's something that, I mean, we've just launched a revised prestige value proposition. And for prestige customers, they get additional two gigs back on top of what they're getting from Standard Bank Connect. So there's the great opportunity. So we can price competitively, but we can also leverage off capabilities that's within the bank, which makes it really sweet again, for the customer that would come out as a winner. - Yeah. So as part of the relaunch, you've announced a couple of new plans. I think they're called connected circle and connected gigs. Connected circle, I presume, is mainly focused on voice and connected gigs as the data plan is right. - Yeah. Yeah, that's correct. - Take me through these plans. What you're thinking is that what the pricing is and why you've engineered them the way you have. - Okay. And again, to step back as Standard Bank mobile, we had plans that were suited to your bank style. So the headline message at that point in time was to say get your bank fees back in airtime. But that means as a prestige customer, if you'd want more value to as a bit of a challenge or if you're a well-customer, you'd have a different type of challenge. So what we said is that let's try to create competitive products that can fit in the market, but a customer has freedom of choice. So there's two real big categories. Like you mentioned, it's connected circle, which is voice and data, and then connected gigs. The connected circle is a bit of a different play and we try to be a little bit creative around that. So we know that unlimited calling is something that the market is embracing. But it comes at a specific price break point. When we were designing our products, we had the desire to keep our customers connected to their communities. So regardless of whether you have airtime or data, we want you to be connected to your community. So a connected circle is that you've got a plan from light to pro and you have unlimited calls within your community or your family with one, three or five unlimited calls. So that means if you've got no airtime or data, you can still be in contact with your community. And then connected gigs is really for that heavy gig data user that can take on some products. And then, I mean, we wanted to be careful not to play the price game purely, but rather play the game around value. So part of the packages that you get, on a TI basis, we've partnered with Dress Your Tech so we can offer up to 50% monthly discount and accessories. And again, it's around creating more value rather than just the pure gigs and minute play. - Do most standard bank connect customers use the standard bank SIM as a primary SIM or as a secondary SIM? And how important is that to you? - Yeah, it's exceptionally important. And I think any telco would want a primary, like a bank would want primary bank, a telco would want primary SIM. Historically, standard bank mobile had a good ported basis in a primary base, but it wasn't strong enough in terms of our view to get the upper levels as what we'd wanted. So for us, it's been connected differently and objective to get primary SIM in customers' hands, but also around this point around, you and your community is about having a SIM for you, but also your family or your community, and that's the value propositions that we're building over time. So it makes it a no brainer to have your SIM with that SIM and connect. - And then just for clarity, this arrangement you have now with MTN, does that give you access to all of their carriers, including 5G? - Yes, it does. - Okay, so all barriers, if you have 5G signal, you'll be up to you as much. - I mean, we've got full access to the network, including 5G, and I think that's one of the drivers. The customers can enjoy the South Africa's best network. They have been rated that a couple are running, so our customers, we want our customers to enjoy the same capability. - So, okay, yeah, okay. So where's all this going? Where's this Envino market going in South Africa? I'm sure you've looked very closely at what's happening in other markets in Western Europe, the United States, possibly even Asia. How far is the South African market behind if it is compared to say Western Europe? And are you expecting big changes to come given the Picasso mandate around operators like Vertica, MTN and others, I think, having to carry Envino's on the network? I don't think Envino's are announced in it yet. Presumably it's coming soon. Let's start with the first question, let's tackle them a bit by a bit. How does South Africa's Envino market today compared to what you see in say Western Europe? - Yeah, I think there's definitely a lag, right? In terms of Envino's catching up, I think in Europe and US Envino's, it's a common look at mobile, like it's common to be an Envino. I think there was a shift in terms of, or the ease of shift happening now, even in the consumer mindset. So if I think about it five, 10 years ago, a customer would come to a bank, which offers a some card in the customer would say, "Why would I need to get my some card through a bank?" "You, my bank, not a telco." So I think this opening up of opportunities of Envino's, where we've got retailers and banks really diving into the opportunity itself. There's a shift in consumer's mindset to say, "I can't get alternative services from another provider." So I believe that there is the sketchup that is happening. There's a lot of growth. I think there's like around 17 Envino's in the market today in South Africa, which is a lot. A lot of them play into that loyalty space at the bottom of the perimeter, the low LSM space in terms of trying to tackle that market. But we've got a trajectory and I think the opportunity is clear. Okay, so do you think we're going to develop now at a foster rate than some of the developed markets and eventually catch up? I think we're going to hit a cap. I think your big operators are going to control their environment. The prediction is about 12% of the Envino market Envino's would capture. Ultimately, from where is it now? I think it's sitting around 2%. It's a lot of growth. Yeah, so there's a lot of growth. And if you think about the industry, it's about 130 billion round industry. And if you can capture even 10% off that as Envino's, there's opportunity left on the table to leverage. So I do see that there's going to be quite a bit of traction in the space. I mean, we see banks and retailers trying to be aggressive. But again, it's around not just being this commodity type of solution which is gigs and minutes in my view is trying to create what additional value can an Envino give me as being part of the bigger ecosystem of your core business. OK. Presumably, you approach more than just one operator and making your decision to switch. I've mentioned the Accossa requirement around Envino's. How are you finding that side of things? Is that to require some requirement helping Envino players in the market? Are you have seen better pricing from network operators for your services? Look, look, I mean, we went through an RFP process and we opened it up to the operators. Like you said, I think Vodacom, they're going to make announcements soon in terms of Envino's. They have to. Yeah, exactly. And the way we've built our platform is actually operated agnostic. But MTN has been an exceptional collaborating in terms of-- and they really have proven to us that we made the right choice in terms of the business. Absolutely. From a commercial side, I think they strict guidelines in terms of what Yikasa is saying, what the wholesale business is. There's meant to be these Chinese walls against retailers, so there's no sharing of information. There's a lot of co-creation between the Envino and the network operator from a wholesale perspective. So to me, I think it's a great opportunity. And I think that's-- I think the operators are getting serious in the space, too, to see how they can monetize their network, right? I think at the end of the day, they've got a pipe and they want to make sure that they get the best return on that investment as well. Yeah, it's interesting. I mean, some of the big operators have been-- I can include MTN amongst them. They've changed their tune now. But historically, they've been quite averse to hosting Envino's on their networks. They see it as a competitive threat. But that seems to have shifted. What do you think that is? No, I think the regulator has a big part to play in that, and including with the spectrum allocation. I also do feel that the operators see the opportunity to monetize and utilize elements of their network. And they'll partner with Envino that naturally has distribution capabilities. And I think that was the exciting collaboration between us and MTN. They could see that we've got a large base of customers that we could potentially leverage. And technology has become more accessible. So I'm not saying that to re-platform is cheap. It's pretty expensive. But you've got cloud technology that allows you to sort of leverage technology in a better way to get Envino's to the market quicker, just value proposition and hopefully scale. Which LSMs are you targeting instead of bank connect? So right now, it's sort of our middle segment and affluent, that's the market, even from a pilot perspective, that we've carved out our value proposition for that base. But we will naturally keep eyes on across all the segments. And I think that's the one value of a bank having an Envino is that you've got this rich customer data. You understand customers really well. You understand the lending capabilities. You understand the transactional capabilities. And saving capabilities. And how do you build solutions for customers that make sense? Are you doing any sort of personalization? I mean, I'd imagine given how much you know about your customers, there's an opportunity to hyper personalization, perhaps even use AI to help you in that regard. Are you looking at that? Absolutely. And I think from a bank perspective, AI is across all the banks. It's something that is being driven. There is this richness of data that you can get if you marry banking data with telco data. And I think as part of our business case in full transparency is that marrying this type of data sets together, you really have a really powerful set of data that you can build, again, meaningful solutions for customers. So we definitely leveraging technology like AI. We're getting the richness of our data to build this hyper personalized view for customers. But there's also this element of not going too far down personalization where you're giving customers confusion, but really building the framework. And I think that's the start of our pilot is years, a framework of products. That's really a steel frame that you can then-- you can customize them both over time. As we develop as a business, those opportunities will naturally open up. Do you see the other banks that have launched MV&O's as your primary competitors, or do you see the telcos as your primary competitor? I think it's a mix of both. We naturally would compete with the likes of the other banks. But I think from a standard bank perspective, the focus is really around less on the competitors, but around what is that meaningful product that we can build for a customer. And there is this revenue opportunity that I think we want to focus on. But yeah, MV&O's are going to be competing with one another. I think you're going to find some consolidation and collaboration between MV&O's over time as well. Certain have scaled capabilities. They have distribution or technology capabilities. So you'll see some of that coming into play. But we'd compete with both. Do you think the MV&O market is a little over traded? You mentioned there were 17 of them. Can the market support more than that? I think it is a bit over traded. I think over time, you're going to see consolidation on some of the MV&O's. MV&O's, in my view, again, is not as simple as one would think. I mean, you'd have to serve a niche market. You'd have to be really clear in terms of who you're trying to serve. As I said, we've been a bit behind the curve in terms of the rest of the world in terms of MV&O's. And you've got these big operators capturing the entire population with 100 million sums out there. So I think MV&O's are going to have to figure out how they serve these niche markets. I'll see consolidation. I also see aggregators playing a bigger role in the space. So if you've got a smaller business that's trying to provide some services, I think aggregators would be primed for that space. OK. OK. Just lastly, is there anything you think Yikasa could be doing to make the MV&O markets better, to help MV&O players flourish? Is there anything, any regulatory interventions that it should be considering? I think there's a lot of discussion around even transparency of pricing between retail and wholesale. And those sort of conversations, I think, would give MV&O's more comfort to know that even within competing organizations, there are these district guidelines. I think Yikasa will follow that path, and that will open up more opportunities for MV&O's. OK. Excellent card tech mystery is head of Stannabank Connect. Many thanks for chatting to the Tech Central Road Instagram, I appreciate it. Thank you for having us, Dank, it was wonderful. My pleasure, thank you. (upbeat music) (upbeat music)