South Africans foresee retail banking going completely digital

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 30 Aug 2022

The majority of surveyed South Africans expect the country’s banks to make a full transition to digital banking within five years, a new report reveals.

The Future of Retail Banking in South Africa report, released yesterday by Boston Consulting Group (BCG) in partnership with Discovery Bank, says hardly anyone today would doubt that at some point in the future, retail banking will be completely digital.

The report sampled 1 000 consumers and 400 businesses, with the majority seeing the possibility of retail banking becoming fully digital in the near future.

The BCG and Discovery report comes as SA’s retail banking industry is evolving, as evidenced by the rise of digital-only banks.

In the past three years, SA has seen the launch of TymeBank, Discovery Bank and Bank Zero. This has forced traditional banks to accelerate their digital-first strategies and aggressively reposition their platform-based models, to offer customers innovative financial products and services.

A key finding is that South Africans are further ahead of the technology curve than their banks.

The report says the vast majority – over 86% – of South Africans across income bands, prefer conducting banking digitally.

More than 50% of customers over the age of 60 are comfortable using a fully-digital bank, while only 40% of customers believe there will be a need for bank branches in five years.

Nearly a third (31%) of the sampled customers – particularly those older than 35 – still prefer some human interaction, especially when resolving complex account problems or completing high-value service transactions.

Some 51% of South Africans say their top reason for visiting a bank branch is that they “prefer talking to a person”.

Digital becomes norm

“Consumers are ready for a fully-digital experience. While COVID-19 initially forced many to change their banking behaviour, they have now adopted digital servicing as the norm,” says Tijsbert Creemers, managing director and partner at BCG Johannesburg and co-author of the report.

“Due to customer behaviours, however, such as preferring in-person service and still placing reliance on cash, it may take time for people to interact more virtually, or to use other transaction types over cash.

“Banks will need to deliver an ecosystem of trusted and secure services that add value and guide people to adopt certain behaviours over time.”

Hylton Kallner, CEO of Discovery Bank, says: “We are essentially powering the future of retail banking and we are now at the starting point of building complete ecosystems for customers.

“This research is an exciting confirmation of where the future of banking is headed, and it has been a pleasure to work with BCG to not only understand consumers, but also to highlight ways the banking industry can adapt in a digital world.

“Clients are no longer limited by ‘business hours’ or geography, and joining a bank or opening an account is no longer dependent on where banks are situated.

“In fact, we have seen that nearly 50% of accounts are opened after business hours or over weekends. With 30 to 40 taps on a mobile device, technology enables the entire process within minutes and without the need to visit a branch.”

Hylton Kallner CEO Discovery Bank.
Hylton Kallner CEO Discovery Bank.

Smoothness redefined

According to Kallner, in a digital banking environment, technology bolsters convenience and good service.

“With the increased level of sophistication embedded in modern banking apps, we find that clients access their accounts almost every day to monitor activity, to manage money and to make payments. Call centres, enabled with video-conferencing and other live chat technology, are becoming the human interface of banks, as we use technology to deliver strong banking capabilities on the front-end and create complete servicing models in a virtual environment.”

Creemers explained that to win in the future, banks should consider which, out of a number of viable business models, best suits them.

“The digital and traditional banking models will exist together and there is a space for all of these. How banks act, depends on their starting position.

“For example, incumbent banks need to digitise existing processes and services that their customers are used to and expect from them, in addition to delivering new digital interaction and service.

“On the other hand, a new entrant or challenger bank can create a completely new digital experience from the start.”