South Africa, like most of Africa, faces some very interesting challenges when it comes to banking. What does this mean for the future of banking?
Large unbanked population
A very high proportion of our population is unbanked. This has led to various Fintechs and banks developing solutions to cater to the unbanked. Most of these solutions come in the form of a digital wallet with some kind of front-end (web, USSD, ATM, etc.) attached to it. Because of this, the banks need to spread their focus across the banked (people looking for new innovations to make their lives easier) and the unbanked (people that are still using lots of cash).
So, when you are spending a fair amount of time on developing your new USSD interface and menu structure for transacting, it is difficult to be focusing on new technologies such as blockchain, AI, etc. We need to be clear that there needs to be innovations in both sectors to make banking easier and more secure for all South Africans.
The trust factor
Another thing you see across the country is the clear divide between the people that want banking to be as machine-driven as possible and those that want to be dealing with humans.
There are people that have accepted the digital revolution and are happy to bank completely online and using apps. These are the kinds of people that when the bank says “sorry, but for that, you need to go into a branch”, they start looking for a new bank to use. These people believe that there is no need for bank branches and that it is much more efficient for them to bank on their own terms, using a medium that they prefer.
On the other hand, there is a large portion of the population that doesn’t have any trust in a screen telling them their balance or that a transaction has happened. This method of banking lacks any tangible artifact that builds trust for them in what is happening. Because of this, this group of people prefers speaking to someone in person or on the phone and hence there is still the need for branches and telephone banking.
The proof of this is how certain banks have tried to open self-help branches which haven’t really seemed to meet the needs of either segment. However, Capitec is opening many branches every year and they are growing at a rapid rate. They have also made their branches accessible and not intimidating to invite anyone from any stretch of life into them to do their most sensitive work.
This lack of trust makes the notion of South Africa going plastic-less in the near future a pipe dream. The card is tangible and is gaining trust slowly. Moving to NFC and QR code-based payments entirely would exclude a large portion of the population from being able to transact in the short term.
South Africa is ahead but struggles to implement
South African banking has been ahead or, at the very least, on par with the rest of the world. We have some of the best online banking experiences in the world. Payment methods like Snapscan and Zapper are revolutionary and has already had an impact on the future of banking.
There are many other great examples of banking and transactional innovations in South Africa that have an impact on the future of banking. However, I feel that it will be difficult for the banks to hang on to their naturally innovative ways. There are two main reasons for this:
- There is a huge lack of education on new products and services offered by the banks. A good example of this is tap-and-go type payments. These technologies have been around for some time and most of the banks have implemented them in their bank cards.However, it has taken ages for many vendors to actually know what this is. I recall countless times telling the waiter, salesperson, teller, etc. that I would like to tap my card and their response was that cards need to be inserted or swiped. Then they would tell me that their card machines don’t support this functionality, but they were new machines.Finally, I would teach them how to receive a payment using NFC and they would be shocked. With the introduction of NFC payments from a cell phone or smartwatch, this problem has become even worse. I have stopped even asking. The issue is with the banks. When FNB launched their smartphone tap and pay, they were incentivising their customers to use this payment method by running competitions to win eBucks and more, but the vendors had no idea.
- South African banks also seem to want to own everything. It is very uncommon for the banks to work with a Fintech company or others to create the best products and services. From Finovate in Dubai, we saw the banks there willing to work with the best and the brightest to delight their customers.If this doesn’t happen here, it will prevent South African banks from staying ahead of the curve.
What’s the future of banking in South Africa?
It will be interesting to watch the banking industry over the next couple of years. With the new wave of digital banks coming to South Africa, there will be a lot of new innovative solutions available.
The real question is whether these new banks will really listen to their customers to create the best experience for them. I do suspect that we will start to see more peer-to-peer payment options. Currently, FNB offer Geo-payments which work very well but there are examples from around the world that allow users to send money using their contact list. I also think that with the launch of Discovery bank, there will be more rewards-based saving and banking, but it will be interesting to see how they implement that.
On the other end of the spectrum, I think the smart banks will be working on ways to reduce the time that customers need to spend in a branch so that this does not become a whole day event.
The real winners in the banking industry will be the ones that can get the unbanked to sign up and more importantly to help build trust with their customers.
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