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SA banks race to transition to marketplace banking

Read time 5min 20sec

SA’s big four banks are aggressively repositioning their business model for marketplace banking, as more banks across the globe supplement their products and services with those of third-party service providers, in an effort to strengthen their value proposition.

While traditional banking models have, for years, offered customers generic financial products and services, underpinned by a platform-based model, the marketplace banking model isdefinedas an “ecosystem” of aggregated products and services sharing similar characteristics presented to customers as a wide range of offerings, according to software development firmIntellias.

Through the marketplace model, banks don’t only offer financial products, but are continuously evolving to fully integrate a host of non-financial products from third-party service providers, such as business management services, health-related products, or even e-hailing functionality, aimed at providing a one-stop shop “platform-as-a-marketplace” service, accessed through their banking interface.

In a new report, titled “The Future Of Banking Is Built On Trust”, research firm Forrester cites the marketplace banking model as one of four major disruptive banking trends of the future, as financial institutions face a stark choice: to own customers or power finance, driven by the need to meet consumer demands in a rapidly-changing financial landscape.

“Driven by changing customer expectations, an erosion of consumer trust and regulatory influence – marketplace banking will be far more prominent by 2025 and table stakes by 2030 as consumers, banks and collaborators help shape banking’s next decade. Competence in marketplace orchestration will be crucial as banks move into advanced phases of marketplace banking, as open finance models mandate a new era of collaboration,”notes the report.

SA’s big four banks − Absa, First National Bank (FNB), Nedbank and Standard Bank − are intensifying their digital roadmap to build a marketplace banking experience fit for the 21st century.

Absa says it has introduced various ecosystem services through its partnerships with Africanfintechs, such as mobile financial services firm Jumo.Last week, the bank announced a partnership deal with Bolt to offer its customers discounts on rides booked on the Bolt e-hailing app and for food purchased via the Bolt Food App.

“Absa has identified critical marketplaces in which we believe we can make a distinctive contribution to add value to customers, through partners such as Woolworths Financial Servicesand fintechs such as Yoco, to enable value-added services to the customer,”says Christine Wu, managing executive: customer value management at Absa Retail and Business Bank.

“The marketplace banking model can only be achieved if banks have the ability to partner strategically with various players in the ecosystem, while working collaboratively to provide seamless experiences. Various new exciting partnerships are currently in progress to make more of these services available via our open API ecosystem in the South African market.”

In May, Nedbank introduced its API marketplace, theNedbank Avo, the Super App, on its digital platform, which is currently in beta phase.The app provides its customers and non-customers access to a range of online products and services, including online shopping and grocery orders, topping up home entertainment services such as Showmax, and a directory listing of home repair and services merchants.

Vishal Maharaj, executive: digital fast lane, explains: “Nedbank is continuously working on enhancements, new features and additional products to offer customers in support of our aspiration of being ‘Africa’s number one digital financial services provider’.

“The marketplace business model is extremely viable and provides value to clients beyond banking services. Especially in the national lockdown period, which made it very difficult for South Africans to get access to various services like groceries and access to service providers like plumbers and electricians,” says Maharaj.

In June, Standard Bank announced it had reinforced its platform-based business model in a digital push to “defend its markets and grow new ones”.

Africa’s biggest bank has partnered cloud providers Microsoft Azure, Amazon Web Services and Salesforce to develop infrastructure that would enable it to build partnerships with vendors and service providers to co-create a wide range of customised solutions for its clients.

“We don’t want to be the shop; we want to be the mall. We want to provide customers with both our own services and the services of our partners in the Standard Bank Group ecosystem,” said Standard Bank Group CEO Sim Tshabalala at the time.

Advancing the platform economy

In February, FNB told ITWeb it is “deliberately” stepping up its game into a data-driven, platform-based future, allowing customers to source services such as plumbers or electricians via its digital platforms.

Arthur Goldstuck, head of World Wide Worx, says the future of the marketplace model clearly lies in the approach banks take to the platform economy, with the major South African banks expected to continue advancing this model.

“South African banks are among the world leaders in adopting variations of the marketplace banking model. Rather than a visionary concept that guides banks into the future, it is a response to how banks have already been evolving.

“Standard Bank talks of the platform economy, and has embraced the concept of being a platform for services, rather than simply being a banking provider, offering several services and products that in the past would have required a separate system and infrastructure,” explains Goldstuck.

FNB has been highly successful in the integration of innovative technology solutions into its banking platform for two decades already, constantly developing a very distinctive marketplace banking model, adds Goldstuck.

“Nedbank is well-known for its security suite, and has expanded its banking app into a broader app suite as well through the Avo, the Super App. An important aspect of this model is that it is not a single monolithic model, but rather a strategic approach to enhancing the value of banking services.”

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