As interest rates continue to rise and concerns about banks’ bad debt levels persist, First National Bank (FNB) is taking an alternative approach, introducing a series of initiatives to stimulate credit. This week, FNB unveiled a new credit card for low-income earners, designed to help those without an established credit history build their credit records. The card offers credit limits starting from R1,000. Additionally, the bank’s middle-class customers now have access to a standalone low-cost credit card and the prestigious black card, available to individuals earning as little as R84,000 per year or R7,000 per month.
- FNB introduced a new credit card for low-income earners, alongside expanded middle-class offerings, including a low-cost credit card and access to the prestigious black card.
- The bank provides added benefits, such as free airport lounge access, and has developed tailored credit offers to help customers receive funds quickly and conveniently.
- FNB’s credit strategy aims to support the economy and small businesses, using a conservative yet proactive approach that focuses on responsible credit growth and customer assistance.
While other banks, such as Absa and TymeBank, have provided standalone credit card offerings for people earning as little as R4,000 and R3,000 per month respectively, FNB is going above and beyond by offering lower-income earners several added benefits. These include free airport lounge access, typically reserved for premium credit cards. Furthermore, the bank has developed “tailored” credit offers for most of its clients, with the potential for funds to be available in their accounts within six minutes after clicking the “accept” button.
FNB CEO Jacques Celliers explained that the bank can proactively provide solutions to customers on a regular basis, rather than waiting for them to apply. “On our platform, on a daily basis, we probably have three credit offers available to any creditworthy client,” Celliers said. While FNB is becoming increasingly proactive, some of its competitors are tightening their credit policies.
However, Celliers emphasized that FNB will not act recklessly. The bank’s mature customer data and tools, developed over the years, enable it to manage credit risk carefully without closing the door on customers when they need assistance. FNB is confident in its knowledge of the customers to whom it sends proactive credit offers.
FNB Commercial CEO Gordon Little, whose division aims for double-digit growth in loans to small businesses, stated that the bank’s existing engagement model with clients has facilitated a deeper understanding of its clients’ financial well-being. Before extending an offer, the bank thoroughly analyzes an individual’s spending and repayment behavior.
Celliers added, “We are conservative. But we are absolutely not conservative when it comes to supporting our good customers. For clients who can afford more credit, we want to be there for them. But we are not venturing into high-risk credit strategies.”
Recently, FNB’s parent company, FirstRand, cautioned that “risky” loans could negatively impact its competitors. However, Lytania Johnson, the new CEO of FNB’s personal banking segment and former chief risk officer, reported that the bank’s credit portfolios are performing better than anticipated in terms of customers’ probability of default.
Johnson acknowledged the challenges affecting many people’s ability to repay debts but noted that FNB’s credit offers target customers who have managed to stay afloat. The bank has examined developments in their employers’ operations, the impact of economic headwinds on their industries, and implemented “temporary relief” options for customers who may unexpectedly face financial difficulties. FNB’s “life happens” solutions are designed to help people retain their homes during tough times.
FNB clarified that its credit strategy does not signify an aggressive credit growth phase. However, the bank believes that the dust from the Covid-19 pandemic – the most significant disruption to credit growth in recent years – has settled. In the context of high interest rates and the struggles faced by many consumers due to increased living costs, FNB considers it appropriate to explore additional opportunities. Celliers also emphasized that as the bank with the largest deposit franchise in the country, FNB has a responsibility to support the economy, particularly small businesses.
“Where we are now, we feel the market, and more importantly, our clients have made sense of the climate. They’ve made sense of their industries. Most of our consumers have fixed their balance sheets… so, we are open for business. There must be a very good reason why a customer cannot get help from us,” Celliers concluded.