With the explosion of Internet users and digital all but defining how the commercial world operates, banking is set to face its biggest challenge in over a generation.
This is according to a report released last week by consultancy firm PricewaterhouseCoopers. Entitled The new digital tipping point, the digital banking survey suggests traditional banking has reached a new tipping point, which will see a global shift in banking over the next three years into another dimension, “with digital at its fulcrum”.
Banks, says the report, need to act now and make the transition to digital offerings to avoid missing out on the “new sources of revenue” that the digital tipping point presents. The report revealed that banking customers are indeed prepared to pay for digital services, with a survey of 3 000 clients in both developed and emerging markets proving they would be willing to pay a premium for “innovative digital capabilities”.
Social media notifications, electronic wallets for loyalty cards and financial tools ranked top in customers' lists of digital offerings they would fork out cash for. “At a time when banks are finding it difficult to sustain revenue and margin growth, the fact that customers appear prepared to pay for the perceived value of using digital services that offer new value to customers, is significant.”
Local landscape
World Wide Worx MD Arthur Goldstuck says local banks still have a low percentage of customers that use sophisticated products. “The South African digital banking environment is very different from those of Europe and North America. Low-cost bank accounts aimed at the mass market offer little that improves on traditional cash management practices, and many users of these accounts rely on retail money transfer services as opposed to electronic transfers.”
He says the mass market has retracted to cellphone banking, due to high convenience and low cost, but social media integration is not a consideration in this segment at all.
At the other end of the economic spectrum, says Goldstuck, the picture is “dramatically different”. He says the beginnings of mass defections away from banks offering only traditional online products and services are starting to become apparent. “The front runner here is FNB, which has embarked on a strong social media campaign at the same time as launching a range of apps for advanced mobile devices, namely smartphones and apps.” He says First National Bank (FNB) is six to 12 months ahead of other South African banks in terms of its digital execution.
Digital diaries
FNB led the way in terms of a mobile banking app with the FNB Banking App in July last year. The app has seen over R1.5 billion in transactions since. Lee-Anne van Zyl, CEO of FNB Online, says online banking has also proven to be a sturdy source of banking for customers, with over 25 000 online banking users registering monthly. In terms of new platforms, Van Zyl says FNB is providing additional services outside of the traditional banking sphere, such as prepaid, lotto, rewards management, PayPal and share-trading.
Herman Singh, CEO of Standard Bank's standalone division Beyond Payments, says there is a definite need to deliver new banking apps, enhance the richness of existing ATMs and Internet banking, and “merge them all into a multi-channel solution”. Singh says this includes integration to social media communities, e-currencies and near-field communication-type solutions. The bank has not to date announced any plans to release a banking app.
SA's largest retail bank by customer numbers, Absa, the first bank to launch online banking, in 1996, says it is exploring new technologies to enhance the customer experience. The bank's CashSend service has seen over a billion rand in transaction value since launching in 2008 and plans for a banking app are afoot.
Newcomer to the South African banking scene, Capitec, says while its focus is on making banking “easy and affordable” rather than employing high-end technology, it plans to meet the inevitable demand that customers will have for mobile and Internet banking. It is unclear as to whether a banking app is on the cards for Capitec at this stage.
The bank's approach, says Capitec's head of strategic communications, Charl Nel, is different to the other banks in that Capitec does not package its mobile and Internet banking as separate products, but rather sees these as “access channels”. Currently less than 7% of the bank's transactions go through these digital channels.
Nedbank was unable to provide comment in light of an imminent announcement regarding its digital offering.
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