Less than six years ago, TymeBank was a bold experiment: South Africa’s first fully digital bank, born from a mission to serve the underbanked with dignity, simplicity, and no paperwork. Today, it is the country’s third-largest bank by customer base, serving over 11 million South Africans — many of them low-income earners and grant recipients. The neobank adds 6,500 new users every day and recently crossed R7bn (~$385m) in deposits.

It’s a remarkable story in a market long dominated by legacy institutions, and a testament to how digital-first banking can thrive in a country still grappling with inequality. But if you ask TymeBank’s co-founder and Group CEO, Coenraad Jonker, the glass slipper is cracking.

In an open letter addressed to South Africa’s Minister of Home Affairs, Dr. Leon Schreiber, Jonker unloads what can best be described as a blistering-yet-measured broadside — the kind of polite corporate fury usually reserved for courtroom affidavits. His target? A government decision to hike the price of accessing digital identity verification services by an eye-watering 6,500%, from 38 cents to R10 per lookup. The government’s plan is for this to be introduced next month.

“This will unravel years of progress in digital transformation,” Jonker writes, “robbing South Africa of its only accessible and free bank account.

Bureaucracy vs the Poor

At the heart of the crisis is the Department of Home Affairs’ (DHA) identity verification system — an essential piece of infrastructure for any digital financial institution. Banks like TymeBank rely on real-time access to the DHA database to verify identities for KYC (Know Your Customer), AML (Anti-Money Laundering), and FICA (Financial Intelligence Centre Act) compliance.

Under the current pricing, South Africa offers one of the most inclusive digital identity frameworks globally, on par with Latin American nations like Colombia and Panama. But the new fee structure would make South Africa nearly twice as expensive as peer countries like Pakistan and Ecuador.

“The DHA is now proposing an exorbitant price increase… without delivering a system improvement,” Jonker says.

That last point is worth underlining. According to the minister’s own admission, the DHA verification system is operational only about half the time. So, naturally, the government’s proposed fix is to… charge more.

A 90% Discount for Legacy Banks?

The DHA has offered a batch-processing option at R1 per field — ten times cheaper than the R10 real-time fee. But Jonker argues this is a false alternative. In a world where digital users expect instant account openings, PIN resets and fraud detection, batch processing is akin to sending a fax in the age of WhatsApp.

“This effectively gives legacy banks a 90% discount while punishing new digital competitors,” Jonker fumes. “It is patently anticompetitive.”

Whether intentionally or not, the pricing model serves to reinforce incumbents while throttling digital challengers that rely on real-time services to function. TymeBank isn’t the only player that will feel the blow — South Africa’s broader fintech ecosystem is watching closely, with concern.

Unicorn Status, But a Fragile Future

TymeBank’s rapid ascent has been backed by heavyweight investors. Its parent company, Tyme Group, achieved unicorn status in December 2024 after closing a $250m Series D round led by Nubank’s parent company, Nu Holdings. It now boasts a $1.5bn valuation, with African Rainbow Capital (ARC), chaired by billionaire Patrice Motsepe, holding a 57.7% stake.

Despite strong deposit growth and increasing income-generating transactions, ARC’s latest financials noted a R324m ($17.85m) markdown in TymeBank’s valuation — a subtle but telling hint that growth isn’t coming cheap. TymeBank is also aggressively investing in AI, analytics, and product development, while looking to expand its loan book (up from R1.9bn to R2.3bn in net advances) and roll out secured lending such as vehicle finance.

Still, beneath the investor optimism lies a growing unease: can the state be trusted to maintain the infrastructure that makes digital banking possible?

Greylisting and Global Trust

Jonker’s letter points to a broader risk: South Africa is still reeling from its 2023 greylisting for shortcomings in anti-money laundering enforcement. Financial institutions have worked tirelessly to improve compliance — with DHA identity verification a cornerstone of those efforts.

By pricing verification out of reach, the government may inadvertently push fintechs toward unverifiable data sources or manual workarounds. That opens the door to greater fraud, weaker AML enforcement, and — in the most ironic twist — a longer stay on the greylist.

“This decision forces institutions toward unverified data in a bid to survive,” warns Jonker. “It undermines the integrity of our financial system.”

A Call for Consultation, Not Confrontation

TymeBank insists this is not a war it wants. The company has proposed a suite of solutions: a phased fee structure, volume-based pricing, a performance-linked cost recovery model, and meaningful consultation with industry stakeholders.

“This is not an unreasonable ask,” Jonker writes. “It is a call for fairness.”

Still, the tone of the letter suggests a growing impatience — and a desire to rally public support. It is no longer just a technical debate over data pricing. It is a symbolic moment for South Africa’s digital future.

For the fintech ecosystem, it is also a test of what kind of environment founders can expect in South Africa. Build a successful, homegrown digital bank that serves the poor and expands financial access — and risk being punished by policy decisions that seem more aligned with legacy protectionism than progress.

So What Now?

TymeBank’s 11 million customers have proved that digital banking is not a pipe dream in Africa. But as Jonker’s letter suggests, scale without systemic support may not be enough.

For now, TymeBank remains bullish, with big plans for product expansion and market share. Its executives still tweet about momentum and customer love. But the mood is shifting. From optimism, to frustration, to a carefully-worded open letter posted for all to see.

It’s not quite open revolt — but it’s close enough to matter.