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Digital-first strategies help SA banks deliver strong results

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Ramping up their digital strategies helped South Africa’s big-four banks deliver resilient results in the first half of 2021, as underlying business momentum and risk profiles showed significant improvement compared to the same period last year.

According to PwC’s Major Banks Analysis 2021 for the period ended 30 June, FirstRand, Nedbank, Standard Bank and Absa experienced a tough first half of 2020, catalysed by the unprecedented challenges triggered by the pandemic.

Against this challenging backdrop, the major banks delivered resilient results in the first half of 2021, performing better than expected. This was due to their refined focus on operational and financial resilience, and developing new banking models around innovation and digital banking, underpinned by tailored customer experience and new skills development programmes.

The report notes the banks’ combined profit of R40.6 billion showed an increase of 177% against 1H20.

When the major banks released results this time last year, it was in the context of a laboured economy with sustained weakness in growth and persistent structural challenges throughout the last decade, notes the report.

“Now armed with recent lessons learnt and emerging customer and workforce trends, management teams have focused attention towards reimaging overall bank strategies. The past year has seen banks developing fit-for-purpose products through platform-based digital channels, with the aim of fostering better customer relationships,” according to the report.

“Banks have also developed new skills for their workforce, while new employees − like digital scientists, behavioural analysts and artificial intelligence experts − are more in demand.”

The move to digital services is predicated on the need to be more relevant and achieve a better share of the customer wallet, notes the report.

Opening up

Last year, SA’s big-four banks told ITWeb they were intensifying their digital roadmap to build marketplace banking experiences fit for the 21st century.

The marketplace model allows banks to continuously evolve to integrate non-financial products from third-party service providers, such as business management services, health-related products, or e-hailing functionality, aimed at providing a one-stop shop “platform-as-a-marketplace” service, accessed through their banking interface.

Apart from expediting their digital strategies, another factor that contributed to the banks’ increased earnings this year, according to PwC, was implementing property optimisation strategies as they re-think corporate and branch real estate, resulting in savings on property costs.

Overall, expenses increased moderately due to staff cost increases, bonuses and amortisation/depreciation charges. Costs remained tightly managed below Consumer Price Index growth for the period, benefiting from a stable inflation environment, and lower travel and entertainment costs.

A client-focused digital banking strategy is now expected as a minimum, and the central challenge for banking in an increasingly competitive environment is increasing relevance to customers, while dealing with regulatory requirements and privacy concerns, notes PwC.

“While investments in IT architecture, digital platforms, data and automation continued, the major banks highlighted ambitions to capture learnings from the COVID-19 crisis and transform how they deliver products and services.

“Various operating models have begun to emerge − ranging from providing end-to-end services alongside underlying financial transactions, to creating ecosystems by connecting customers with partners, fintechs and other providers through open architecture, and outsourcing some aspects of the delivery model to strategic delivery partners,” according to the report.

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