Technology is changing everything including the way humans interact with their environment. Within the banking space, technological advancement is providing new opportunities for banks to build closer relationships with their customers. While this has brought immense benefits to both banks and customers in providing seamless banking services, it has also allowed new entrants to compete in an industry which has historically been protected by high barriers of entry. The risks to traditional banking systems and approaches have become varied and complex.
One of such risks facing the banking industry are fintechs, which could result in consumers disintermediating banks, particularly in the payments segment of the market. There are many fintechs which on their own do not really pose a threat to the major incumbents but taken together, they are increasingly becoming a very worrying threat. In Africa, consumers may leapfrog and move quicker to fintech products.
However, banking remains a scale business, so those that have scale and are also able to respond fast enough to meeting customer needs, can successfully challenge the fintechs. While fintechs are likely to offer an attractive value proposition for a specific segment of the market they are also likely to face the classic challenge of scale.
The likes of Discovery, which operates in an adjacent industry as they have got a customer base already, which is in what I call the sweet spot, the affluent market. They have a history and track record of being customer-centric and servicing their customers well. They have got systems; they’ve got excellent people. We do not know when this year they will launch their bank, but we know they will be able to launch it with a great value proposition. So they are formidable; they loom large. Banks would have to position themselves strategically to respond to these threats as and when they rear their heads.
I am very well aware that banks are actually working by the clock to scale up in order to tackle the challenges of times head on. At Standard Bank for instance, we have been investing heavily in technology as part of the bank’s strategic pillars to digitise the bank and be more client centric. Standard Bank has spent more than USD$1.6 million to upgrade its entire core banking system, allowing for real-time processing, the ability to handle greater volumes of transactions, closer integration across business units, and speedier service.
In the modern era, where you have got a combination of factors – one, you have got customers that are used to being served slickly, 24 hours a day, at a time and place they choose, with security, with speed, by Google, Amazon, Uber, etc. That’s the type of experience a modern customer is used to. You have to become customer-centric and focus on the customer and be able to deliver to that customer at that level, because otherwise savvy competitors will stand between you and your client. You have to digitise the organisation, because that’s what your clients are used to and expect.
In order to remain competitive, banks will need to update technology on the back-end in order to deliver a seamless experience on the front end, since customers will have little tolerance for glitches, no matter how sleek the user interface.
It is absolutely crucial to our competitive advantage. We are betting that the winners in banking will be those incumbents that are able to digitise and not allow themselves to be disintermediated by fintechs and/or people who own the platforms that we need, such as the mobile operators, and technology companies generally” he says. (See sidebar on competition.)
For Standard Bank, the investment in its core banking platform is already translating into higher market share in the affluent segment of the market, fewer complaints at the Ombudsman for Banking Services, and improvements in Net Promoter Scores (NPS), a tool that is used to measure the loyalty of a company’s customer relationships. With the new core banking platform in place and most customers now migrated to its new SAP system, opportunities abound to improve the ways of doing business and customer experiences.
Another lesson the banking industry can learn from the likes of Google and Amazon is the cardinal importance of data. There are few organisations that have as much data about clients and have it legally and fairly on the basis of the banker/client relationship. I mention Google and others because they are able to use their data by devising contextual offers for their clients and thereby delighting them. This is what clients are used to and financial institutions must harness the knowledge and the relationship with their client, the channels that the client likes using to interface with you, and the data you have got.
Where banks were historically designed around specific products and channels, operating largely as stand-alone silos, technology now allows for a more holistic view. For instance, when you apply for a home loan, you can now go on your app and apply, and we can offer you life insurance to protect yourself and your family in case you were to pass on; homeowners’ cover, in case your property gets destroyed; and structure the lending for you in such a way that maybe you use some of it to leverage, but maybe you make investments instead of just borrowing.
This is why the vision of Standard Bank is to create a universal financial services organisation that delivers seamlessly the full suite of product and services, meeting customer needs and creating value for them at the time that is convenient to them when they want it. It is our belief that in this modern day and age, the ability to safely and efficiently deliver our product and services to our clients, when they want it, 24/7, digitally or in person – if they prefer to do it in person – , are what’s going to differentiate us from the others.
About the Author
Raised in Soweto, Standard Bank CEO Sim Tshabalala holds a BA and an LLB from Rhodes University, and an LLM from the University of Notre Dame in the US. His finance career started in 1994, when he joined financial services firm Real Africa Durolink. He joined Standard Bank’s project finance division in 2000 and has since held numerous positions in the group until his appointment as co-CEO of the group in 2013 with Ben Kruger. He took over as the sole group CEO in September last year.
