At the heart of inflation it seems South Africans need a hero and Bank Zero is ready to jump on the bandwagon with what seems to be a technologically advanced low cost virtual bank on the horizon.

With the goal of penetrating the market with low prices which have not been revealed, whilst simultaneously taking banking technology to a ground-breaking new level by having no physical presence whatsoever nor a website, the bank is a smartphone application made to make banking functions easily accessible 24/7 worldwide, without being limited to bank operating hours as well as functions that can only be done by the bank such as freezing a bank card.

Deposits and withdrawals are made possible as a result of Bank Zero's new partnership with Mastercard which is an advantage as the market is familiar with Mastercard as a major player in matters pertaining to banking. The Bank is described by one of the co-founders Michael Jordaan, former CEO of First National Bank as a bank in your pocket.

Banking, just like all commercial sectors is constantly undergoing practical rather substantial changes year in and year out, changes which are a result of the vast developments in technology which is one of fastest growing industry in the world. The profound effect of technology results in numerous pro's such as online banking applications used to perform some banking functions and con's such as phishing scams by cyber criminals.

South African banking law is composed of a diverse and wealthy pool of numerous sources such as Common Law and Statute Law. Because of the complexity of the relationship between a bank and its client, it goes without saying that the bank has the duty to act in good faith and vice versa. It is also important to take note that even though technology is rapidly evolving,  not only is it a bit slower in South Africa but cyber criminals and phishing scams are equally on the horizon.

Taking this into consideration, several questions arise such as: how safe ones money really is; does low cost mean low security; am I protected by the normal banking laws, and if so, to what extent? Although Michael Jordaan says Bank Zero is going to be one of the most secure banks in the world, with numerous layers of security systems, in this technologically advanced world there will always be room for cyber criminals which boils down to how the client is protected by the law from scams such as phishing activities.

It may be worthwhile taking a look at the case National Westminster Bank v Barclays Bank International, which I will refer to as the Westminster case, which is an enrichment case wherein one was enriched at the loss of another person. In this case, cheques were paid out by the defendant and the plaintiff claimed that the signatures were forged and the defendant claimed it had no knowledge that the signatures were forged. The plaintiff then based his argument on the fact that the bank was negligent and breached its duty of care by honouring the cheques. However the court dismissed the negligence plea stating that should a bank come across a cheque with a client’s signature in proper form, the bank would owe no duty of care to the payee. When taking into consideration cases such as the Westminster case, questions such as the extent of ones protection by the law as well as the extent of protection that can be provided by this bank surely arise.

Banking, whether in the traditional sense or innovative is a crucial feature of any economy. The relationships of banks and their customers present a plethora of possible legal issues, for instance, what rights and legal duties banks and their clients have in withdrawing or depositing money and when a business can actually be called a bank.

The fact that the response to these questions cannot simply be answered with reference to one legislation or case attests to this. Moreover, at a close look, we would discover that one of the reasons we cannot do this is that the nature of banking is so dynamic – impacted by aspects such as the internet, otherwise developments such as Bank Zero would not exist.

Whatever people do in the financial services (or any other industry for that matter) usually comes with legal consequences. It is doubtful that Bank Zero is oblivious of this fact. Be that as it may, it is quite clear that Bank Zero is ready for the South African market, but is the South African market ready for it? Only time will tell.

Written by Andrea Chinamasa, Legal Advisor at MPISI CORA, a legal consultancy firm based in Johannesburg, practicing in commercial law; risk management; mining law and governance.