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Absa still sees value in branches

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Andy Baker, chief technology officer at Absa Group.
Andy Baker, chief technology officer at Absa Group.

Absa is digitising its outlets at a time when some banks are closing facilities to encourage customers to use digital technologies.

This was revealed by Andy Baker, chief technology officer at Absa Group, in an interview with ITWeb.

Unpacking Absa’s digital strategy, as the competition in SA’s banking sector hots up, Baker said the bank is actually investing in more technologies at its branches country-wide.

The interview follows the big four bank last week releasing its interim financial results for the reporting period ended 30 June.

In its results, Absa attributes some of its successes to digital technologies, as it tries to reinvent itself after separating from its parent Barclays in 2017.

In 2018, Barclays Africa Group was officially renamed Absa Group and started trading under its new name and new share code (ABG) on the Johannesburg Stock Exchange.

In April this year, the bank successfully migrated the banking platform used by six of its African subsidiaries – in Botswana, Ghana, Mauritius, Tanzania, Seychelles and Zambia – from Barclays’ data centre in the UK, to Absa’s data centre in SA.

Tech disruption

Absa is facing competition from several different fronts, including the traditional banks, digital newcomers, as well as telcos which are more and more encroaching on the banking space.

According to Baker, SA’s banking sector has been disrupted by technologies for a number of years now.

“However, this disruption is not only happening in South Africa alone. It’s happening everywhere across the globe,” he said.

ITWeb recently reported that the emergence of new digital banks in SA had ignited a price war among financial institutions, with the incumbents slashing their banking fees one after the other.

The new digital banks shaking up the South African market are TymeBank, Bank Zero and Discovery Bank.

“This disruption is not something that is new. It has been there before and it will certainly not stop anytime soon,” said Baker.

Regarding branch closures, he noted: “We want customers to do what is convenient to them. We’re investing in our brand technology as we speak; we’re moving the branch onto a brand new fibre-optic network design that will be very high performance and very low latency to make the branch experience better for customers.”

Absa’s competitor, Standard Bank, recently faced backlash after it closed 104 branches countrywide within a short space of time. To date, one in every five Standard Bank branches has been closed down.

The bank’s CEO, Sim Tshabalala, says the decision to close the branches was mainly because most of its customers had moved to digital banking.

Standard Bank later acknowledged it made a mistake by closing some of its branches.

Absa is also aggressively investing in technology in its retail division. In its results, the bank said its largest business unit, Retail and Business Banking South Africa, “is showing faster than market growth in key product areas, in line with the group’s commitment to regain its leading position”.

Absa’s results show the focus on digitising the bank has already yielded an engaged and digitally active base, as seen in the app user base increasing 20% and the frequency of app use increasing from once every five days in 2016 to once every three days.

The number of app logins increased from 3.4 million to 14.8 million since 2016, and the average product holding of customers who use the app was 1.5 more than that of non-app users.

Fintech play

Absa is also looking to harness the power of fintech to drive its banking platforms.

Baker made reference to the bank’s WorkinProgress innovation centre in Cape Town, formerly known as Rise, where the bank supports the development of start-ups and entrepreneurs in the fintech space and facilitates collaboration to generate new solutions.

Besides, said Baker, the bank has a very strong technical team in-house which is responsible for most of the digital innovations in the company.

“For example, ChatBanking, a world first that lets you make instant transactions by using Facebook Messenger or WhatsApp, was developed by Absa staff,” he said.

Absa was also first to launch Samsung Pay in South Africa last year. 

Absa’s Timiza app, which provides customers in Kenya with mobile lending, savings and insurance products, further supported Absa’s retail banking performance. This year alone, Absa disbursed over 764 000 loans to 173 000 active customers.

Artificial intelligence is one of the other technologies Absa is banking on. It started experimenting with chatbots in mid-2016 to assist customers in the opening of a new account.

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