Nedbank in big push to commercialise data

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 06 Mar 2024
Nedbank is on the brink of concluding its “Managed Evolution” IT refresh programme.
Nedbank is on the brink of concluding its “Managed Evolution” IT refresh programme.

With big-four bank Nedbank on the brink of concluding its mega IT refresh programme − called “Managed Evolution” – it is now in a drive to commercialise the data obtained from the multibillion-rand project.

So said Mfundo Nkuhlu, Nedbank chief operating officer, yesterday during an interview with ITWeb after the group announced its 2023 annual financial results.

In the results, Nedbank says it scored some “digital wins” anchored by the Managed Evolution programme, which is now 95% complete.

In a difficult operating environment, Nedbank Group delivered a strong financial performance for the 12 months to 31 December 2023, as headline earnings increased 11% to R15.7 billion.

The IT refresh kicked off in 2016, and in March last year, Nedbank said it was 91% complete.

“What is satisfying about these results is that they are underpinned by the execution of strategy. In this respect, the technology investment programme that we call Managed Evolution is now 95% complete,” he said.

“We expect to finish the programme by the end of this year, when we complete our core banking refactoring together with the two outstanding client service journeys in home loans and vehicle finance.”

Speaking of project costs, he said the intangible software asset on the bank’s balance sheet peaked in 2020 at R9 billion.

“At the end of 2023, it had come down to R7.9 billion. This tells you that as we begin to amortise the asset as we deploy solutions, it shifts from the balance sheet to the income statement.

“If I look at the annual IT cashflow spend, that peaked in 2017 at R2.3 billion and has now been sustained at materially lower levels since then. This gives us confidence that there is no risk of overruns in this IT investment spend.

“There is always the risk with IT projects that they may not be delivered to the original scope; they take longer than initially intended and cost more.

“We are confident we will deliver the programme by the end of this year as initially intended – it will be within scope and budget.”

Mfundo Nkuhlu, Nedbank chief operating officer.
Mfundo Nkuhlu, Nedbank chief operating officer.

However, implementing the large-scale IT project has not been smooth sailing for the bank, Nkuhlu revealed.

“There has been a number of challenges. You can’t implement a programme of this scale and magnitude without encountering challenges.

“First of all, this is like changing the engine in mid-flight. For us, it was important that we start by focusing on the front-end of our digital solutions where we have interfaces with clients. We had to make sure we make a big difference in the lives of the clients and they are able to interact with us seamlessly.

“Clients often want a seamless experience – they don’t really care much about what is happening in the back-end. The back-end is for us to manage.”

The other key challenge has been on the skills front, he said. “We have to combine technology with people. We needed a high quality of digital and data expertise in an environment of limited pools available in the market where competition is fierce between ourselves and our peer group of competitors.”

According to Nkuhlu, the bank is now focusing on commercialising its data and analytics capabilities, process optimisation, as well as payments modernisation.

Banks often commercialise data in various ways, leveraging the vast amount of information they collect from customer transactions, financial activities and other interactions. According to Accenture, by leveraging data, banks are able to uncover substantial opportunities to grow revenues, reduce costs and curb customer attrition.

In addition, the financial services provider is now migrating clients to the new core banking platforms.

Nkuhlu added that the benefits of the tech programme are linked to the optimisation of the physical distribution infrastructure in the retail business and the optimisation of the corporate real estate.

“It’s one thing investing in technology and quite another to use that to get access to data, and use that data for developing insights on the needs of clients. We need to be able to develop these insights even before the client has anticipated the need.

“The big push is to commercialise our data and make sure it is a source of new revenue that we generate for the growth of the group and help to pay for the investments we have made in IT.”

He noted the IT investment has had a positive impact on strategy, clients and the group.

“We are now able to onboard clients digitally on a seamless basis. We have over 200 client service journeys for individual clients that have been rolled out. We are now beginning to use both our app and electronic channels for onboarding and client servicing. This also enables clients to do self-servicing.

“This is reflected in growing the digital sales penetration that is now at 55% of total sales. This has also enabled us to focus on cost-savings.”

Digital momentum

According to its financial results, digital initiatives helped Nedbank increase the number of digitally-active retail clients in SA by 11% year-on-year (YOY) to 2.9 million, representing 69% of retail main-banked clients.

Retail digital transaction volumes in SA increased by 12% and transaction values were up by 10%. Digitally-active clients across the Nedbank Africa regions business increased to 64% of its total active client base.

Active Nedbank Money app clients reached 2.3 million in 2023, up by 16% YOY. Transaction volumes on the Money app increased by 18% YOY and transaction values increased by 19%.

The bank points out that since the Avo super app (SuperShop) launch in 2020, it has signed up 2.5 million customers (up by 26% YOY), with over 23 000 businesses registered to offer their products and services on this e-commerce platform.

“Avo continues to grow exponentially, with a more than 100% YOY increase in gross merchandise value as all three Avo ecosystems (Avo Solar, Avo Auto and Avo B2B) gain momentum,” it adds.

Avo Solar launched in August 2023, with over 100 residential installations, of which 70% are being financed by Nedbank.