Digital lifestyle sways banks to provide more telco services

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Within days of each other, two of South Africa’s big-four banks announced partnerships with telecoms service providers to introduce internet solutions for their customers.

This week, First National Bank’s (FNB’s) mobile virtual network operator (MVNO) business FNB Connect rolled out its fibre solution, in partnership with Vox Telecom, targeted at small and medium enterprises.

It also introduced software vouchers, including Microsoft 365 and anti-virus solutions like McAfee and Norton, that FNB and RMB Private Bank customers can access via their banking apps.

The week prior, Standard Bank revealed it had partnered with internet service provider Webafrica. The initial focus of the partnership, which comes into effect in the first quarter of 2022, will be on making high-speed internet access available to the bank’s customers.

Standard Bank notes the tie-up comes on the back of burgeoning demand for internet connectivity, including fibre access.

Analysts tell ITWeb the intensive broadening of banking services to include a range of ICT-related services is both “judicious and necessary”, amid the digital shift within the market.

Digital momentum

Mark Walker, associate VP for Sub-Saharan Africa at IDC MEA, says it makes “perfect sense” that banks are offering more non-bank services.

Walker explains that banks are becoming fully digital to cater to the needs of the new reality of hybrid work, new customer expectations, scale, speed and security.

“Banks recognise that many financial transactions are not only between the customer and the bank, but increasingly include external entities such as retailers, suppliers, municipalities and other entities, and these are digital in nature,” he says.

“The bank offers a trusted, accountable and reliable technology platform for these transactions and is therefore perfectly positioned to use this to enhance existing relationships and add value.”

According to Thecla Mbongue, senior research analyst for Middle East and Africa at global research and consultancy firm Omdia, banks need to retain customers but also attract additional high-value customers.

As a result, the heightened shift to offer products/and or services that are akin to telecoms service providers characterises the current digital transformation.

Says Mbongue: “Connectivity and broadband access are key drivers of the transformation, and financial institutions are using access to connectivity as a customer acquisition and retention tool.

“Banking institutions have now understood it is essential to provide value-added services to remain competitive and relevant. As they are not experts in the value-added services fields, we should see more partnerships being sealed in the near future.”

Andre Wills, MD of Africa Analysis, says future retail competition will be for the digital lifestyle of customers. “Banks recognise they need to compete for a wider share of the customer digital spend on services, to establish their presence as a digital brand in the mind of their customers.”

He points out the trend of financial institutions increasingly tapping into telecoms-related services is seen across vertical sectors.

It is not only financial institutions that are expanding into adjacent digital services, notes Wills.

“We have seen retailers also enter the telecoms world through offering MVNO services. This shows recognition of the importance of targeting the digital lifestyle of their customers. Banks can, for example, expand their customer proposition to offer a suite of services beyond just financial services at an attractive price.

“In the case of small companies, a bank may offer a prospective customer not only financing to start or expand a business but an entire ‘company start-up in a box’, including fibre connectivity, internet services and in the future possibly some cloud services (such as an accounting package). In doing so, banks can attract new customers and further expand their customer loyalty programme.”

Bradwin Roper, FNB Connect CEO.
Bradwin Roper, FNB Connect CEO.

FNB has been making big moves in the local telecoms space through FNB Connect.

Launched in June 2015, FNB Connect is available to FNB customers, offering a choice of contract and prepaid plans, devices, as well as prepaid vouchers in the entertainment, transport, music and gaming categories.

FNB Connect is a three-pillar business made up of the MVNO, device and service provider business. With the launch of the MVNO component, FNB became the first bank in the country to establish such a mobile offering, piggybacking on Cell C’s network.

Its latest offering – FNB Connect Vox Fibre for Business – is available to all its business account-holders, including sole proprietors, while the software vouchers are available to all FNB and RMB Private Bank customers.

FNB CEO Jacques Celliers explains: “The introduction of fibre is premised on our belief that effective, high-speed, reliable and secure telco services are critical to running a successful business.

“Furthermore, the software and productivity tools will provide value and convenience to our customers, enabling them to access a wide range of services on a single digital platform.”

Bradwin Roper, FNB Connect CEO, says: “We continue to see phenomenal growth in our telco business as our integrated offering resonates with many of our customers.

“Similarly, we consider ourselves a leading online retailer, having recorded over R17 billion in sales of prepaid services such as electricity, airtime, data and digital vouchers like Uber, Showmax and Spotify in the past 12 months to June 2021.

"In the last year, COVID-19 has compelled businesses and individuals to embrace digitisation and hybrid ways of working. As a result, our fibre proposition and software vouchers will help customers with increased productivity and security,” he adds.

Not so fast

While the recent events may have spurred adoption of digital services, the analysts agree that banks are not looking to become telcos.

Rather, this is a trend of providing services efficiently in a digital world, states Mbongue.

Wills notes offering a communications service is part of the expansion of the digital services offered by banks. “This is like retailers who offer mobile services via an MVNO offering.

“The traditional telecoms operators and other companies in other vertical sectors are expanding their digital services. This signals the importance of offering a wider range of digital services to the market.

“Banks and telcos share many attributes, such as customer bases and service delivery; however, they are very different in terms of day-to-day operations, technology use and performance indicators.

“That said, there is plenty opportunity for partnership and collaboration, especially around deployment of cutting-edge tech such as artificial intelligence and machine learning, to improve the speed, security and relevance of banks to their business and consumer client bases,” Walker concludes.

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