Pierre Romagny | Partner | Oliver Wyman | mail me |
Increased shareholder value and better customer benefits could be generated with the adoption of seven set-piece plays, according to a new report on the digitalisation of South Africa’s banking and financial services.
Nedbank, Absa, Capitec Bank, Bank Zero, FNB, Standard Bank, Discovery, Old Mutual and Sanlam executives contributed to the report, titled Digitalisation in Financial Services in South Africa, which examines recent developments and evolving digital strategies in the sector and points out a number of advantages to be gained through the adoption of novel strategies and processes.
Digitalisation benefits
The report identifies seven digital plays, using emerging ecosystems and open architecture solutions, to enhance and individualise customer offerings in markets both within and beyond traditional banking and financial services.
For customers, these digitalisation opportunities can result in an improved experience with increased access to convenient products and value-added services. For shareholders, they present increased profitability through access to new customer pools, new revenue streams and improved client retention.
Seven suggested digital plays highlighted in the report:
- Establish platforms for colliding businesses that let customers transact beyond the realm of traditional financial services.
- Build all-in-one ecosystems that offer a one stop-shop service for customers’ needs.
- Use open application programming interfaces (API) in those platforms with simple plug-ins to provide access to expanded ranges of products and services.
- Create or bolster partnerships to innovate and adopt new technologies to improve customers’ digital experiences.
- Expand product offerings through banking-as-a-service to deliver frictionless experiences and scale them into external third party eco-systems.
- Harness data to deliver enhanced personalised customer services.
- Adopt robo-advisory solutions to provide improved access to financial advice.
These seven digital plays can provide first-mover advantage by enabling quick and multiple connections with other industries to rapidly adapt to changing market and customer needs.
Creating customer and shareholder value
Financial services industry partners must be able to plug in and out easily and provide data to create customer and shareholder value.
“South Africa hosts a thriving and dynamic digital landscape and this report provides valuable insights from decision makers at its top financial institutions which provide a deeper understanding of how far digital has come and where it is taking the country in the future.”
– Fahim uz Zaman, Efma Regional Manager Middle East & Africa
The report outlines how the COVID-19 pandemic forced changes in consumption and how people transact, which have accelerated the pace of digital adoption. It cites one South African insurer reporting a 470 percent growth in the number of customers transacting on its mobile app between 2018 and 2020.
Similarly, one of the country’s largest banks saw a 200 percent rise in digital transactions between January – August 2020 compared with the same period in 2019.
The report emphasises the use of Open Application Programming Interfaces (a software intermediary that allows application programmes to interact with each other and share data) with plug-in services to build and orchestrate feature-rich, one-stop-shop customer service eco-systems.
In conclusion
These are key to unlocking the potential value-adding opportunities when tailored to individual clients and run either directly by banks and insurers or operated as turnkey solutions for third-party partners.
However, the report cautions that the digitalisation and ‘open’ banking opportunities attract their own risks and threats, specifically for data privacy, cybersecurity and compliance, which financial institutions must understand and protect themselves against if they are to avert reputational and financial institutional damage.
In South Africa, digitalisation also demands transformations in internal mindset and infrastructure to overcome strategy and technological obsolescence. It requires a complete change in philosophy of what a financial service provider offers and an overhaul in terms of ambition.
