Launching the app-driven, no-fee bank of the future
Bank Zero delivers one-of-a-kind customer experiences with IBM and open-source technology

“Powerful banking at zero cost is the new normal for banks,” says Jay Prag, Chief Technology Officer (CTO) and Chief Strategy Officer (CSO) at Bank Zero. “We want to be that change. Our vision: a zero-fee, zero-branch bank that provides the same great experiences for an enterprise as it does for an individual.”

With smartphone penetration in South Africa rising sharply in recent years — from 43.5% in 2016 to 91.2% in 2019 (PDF) (link resides outside of ibm.com) — it’s estimated that there are now over 50 million users in the country. Bank Zero saw an opportunity to bring banking services to new parts of the population through an app-driven model.

“We identified a gap in the market for a banking ecosystem for individuals and businesses, building communities that promote financial inclusivity,” explains Prag. “In response, we wanted to launch a truly digital bank, with everything from identity verification to everyday transactions handled through an easy-to-use, modern app. Creating a bank from scratch is no easy task, but we put together an exceptional team that was up for the challenge.”

Customer Growth

 

On track to win 100,000 customers to reach breakeven

Faster Response times

 

Enables sub-millisecond response times

Supported by IBM and open-source technology, Bank Zero is gaining traction in the market. We’re on target to reach breakeven at 100,000 customers, and we’ve maintained sub-millisecond response times even as card transactions have doubled and app logins have increased tenfold. Jay Prag CTO and CSO Bank Zero
Refining the concept

To bring its innovative app-driven model to life, the Bank Zero team began homing in on some of the details. The company aimed to offer users high levels of control and transparency, via a low-touch model.

“We wanted to provide visibility of every cent going in and out of the bank,” says Prag. “As we were self-funding the bank, we didn’t have millions to spend on existing core banking software suites. We wanted to cost-effectively self-build a platform based on open-source software, which offered world-first functionality around security, usability and transparency.”

Top of Bank Zero's agenda: selecting the IT infrastructure to support its new banking platform. With big ambitions, the bank started looking for a vendor specialist offering expertise, scale and performance, all at a competitive price-point.

“We’re aiming to reach every individual in South Africa alongside small and medium enterprises,” explains Prag. “So, we wanted IT foundations that could scale easily. To offer customers zero to low fees, we must maximize internal efficiency, so we were looking for solutions that were simple to manage and extremely stable. Customer experience is critical to us, so performance was another priority. Finally: security. Our app-driven model depends on users trusting us to protect their data from every eventuality.”

Weighing the options

Bank Zero embarked on a rigorous evaluation of different IT vendors before choosing to work with IBM. Prag comments: “As soon as we connected with the IBM team, we knew that they were the right choice to help us bring our vision to life. They provided unprecedented access to technical experts to answer every one of our questions. We’ve built deep relationships, with key IBM contacts going above and beyond to advance the Bank Zero mission.”

The bank carried out comprehensive testing of IBM technology to assess performance. Prag recalls: “We compared IBM LinuxONE to a distributed server approach, writing code to break down exactly how the CPU of each offering copes with different tasks. The results were compelling: the unique memory architecture of IBM LinuxONE means you can measure performance in microseconds rather than the milliseconds offered by distributed servers. When you’re processing massive volumes of transactions in parallel, those numbers quickly add up!”

Minds made up, the Bank Zero team opted for the IBM® LinuxONE Rockhopper II platform running Ubuntu. The solution hosts the bank’s open-source stack, which includes Docker, Kubernetes, Wildfly, Java and more.

“The combination of Ubuntu with IBM LinuxONE proved highly cost-effective for us,” says Prag. “We’ve now built proprietary security features around Ubuntu that give us ongoing visibility of exactly who has root access to different parts of our environment.”

To drive down response times further, the bank deployed IBM FlashSystem® storage. Prag adds: “Our old disk subsystem didn't meet our performance requirements. To ensure that storage wasn’t a bottleneck on performance, we chose NVME-accelerated all-flash arrays from IBM.”

 

Secured to the hilt

To safeguard data, Bank Zero took advantage of IBM LinuxONE security features, including pervasive encryption and EKMF enterprise key management for card transactions. The bank also teamed up with IBM Labs to develop new cryptographic functions.

“Working with IBM, we took a multi-layered approach to security, embedding IBM cryptographic APIs throughout our environment,” says Prag. “From security protocols to firewalls — a bad actor would have to circumvent multiple measures before they got anywhere near our data. The beauty of IBM LinuxONE is that it is secure by design: the secret sauce is actually built into the circuitry, making it exceptionally difficult to compromise. We have to give credit to the IBM team, who really know their stuff.”

With customer experience at the core of its value proposition, Bank Zero was keen to ensure that security did not affect performance or operational efficiency.

‘Using IBM technology, we’ve developed a formidable cyber resilience strategy that doesn’t require lots of specialized skills or attention to manage,” comments Prag. “By uniting IBM LinuxONE, IBM FlashSystem and Ubuntu, we’re able to automatically encrypt data and give our customers extra protections with no impact on service levels.”

Making a mark

Since its launch a few months ago, Bank Zero has seen its client base grow fast. The company is confident that it has the capacity to meet escalating demand.

“Supported by IBM and open-source technology, Bank Zero is gaining traction in the market,” says Prag. “We’re on target to reach breakeven at 100,000 customers, and we’ve maintained sub-millisecond response times even as card transactions have doubled and app logins have increased tenfold. Thanks to the highly scalable IBM infrastructure, we’re sure we could cope with two to three million customers without making any significant changes.”

Bank Zero has been able to accommodate rapid growth while maintaining a relatively lean IT team, factors that have been crucial contributors to the company’s no-fee model. The built-in automation and straightforward management offered by IBM technology contribute significantly to the bank’s internal efficiency.

“We have just two people managing the IBM LinuxONE platform that supports banking services for thousands of people,” comments Prag. “Choosing IBM technology allows us to concentrate on making an impact on the South African banking sector with a totally fresh take. We have more time to focus on developing our customer base and exciting new features for our app.”

Bank Zero is establishing its place at the frontier of banking, which is driven by smartphones and associated banking technologies.

Prag concludes: “We’re the first bank in the world to run an open-source banking platform on IBM LinuxONE, and we’re the first in South Africa to offer totally branchless banking services. By combining the very best of IBM and open-source technologies, Bank Zero is spearheading a revolution in banking that we feel confident will increase financial freedom in South Africa and beyond. Our relationship with IBM is pivotal to making this change happen.”

Bank Zero logo
About Bank Zero

Bank ZeroExternal Link (link resides outside of ibm.com) is a modern, app-driven bank aimed at both businesses and individuals, which offers users control and transparency. Announced in January 2018, Bank Zero offers zero to low fees, an advanced app, a patented card and email chat. Headquartered in Johannesburg, South Africa, the company focuses on solving the banking problems that customers grapple with every day.

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