Brave new market for transactional banking
Economies are getting stronger across Africa. Before we can unpack the operating challenges and opportunities in transactional banking, we need to emphasise this point.
The global economy has faced a reset of sorts as inflation has spiked and global interest rates have risen from historical lows. It is certainly not “business as usual” in the world of financial services and banking.
Emerging markets, including SA, face a myriad challenges, but too often a negative narrative overshadows real progress. In 2022, I was a member of a delegation at an event co-ordinated by the IMF focused on African sovereign risk. This event was intriguing as analysts from around the world assessed sovereign risk on the continent, but at the same time grappled with structural issues in the US and European financial systems.
There has been an impressive recovery in African markets, with Tanzania and Zambia leading the way, while Ghana is showing early signs of green shoots after a challenging year.
It became increasingly clear to us as representatives of Africa that we have a very real place to play in the global economy and are in many ways more agile and can respond quicker to changing levels of economic activity.
Our global peers recognise the opportunity, and if we focus more on the opportunity and less on the challenges we will unlock significant value.
What does this mean for transactional banking? We need a mindset shift if we are going to operate alongside our global peers. The competitive landscape has evolved such that it is not enough just to be competitive in the domestic banking sector; African banks are now competing against global peers and a host of world-class fintech businesses that are fundamentally changing the financial services landscape.
This means we need to attract and retain world-class talent with a combination of skills encompassing global technology best practice alongside an understanding of financial services in both emerging and developed markets. The single biggest risk we now face is the “semigration” and emigration trends.
Global recruiters are snapping up the best and brightest technology talent, and this holds back our ability to develop and roll out local technology solutions to enhance the transactional banking landscape.
Despite these challenges, there are two exciting trends. The first concerns the payments journey and real-time payments in Africa. In recent months we have made significant progress in technology to facilitate crossborder payments. This means individuals and businesses can transact with far less friction and at lower cost.
The second is the emergence of a hub model when it comes to regional banking. This has been catalysed by the African Continental Free Trade Area, which aims to enhance intra-Africa trade and ease of doing business. East, West and Southern Africa offer real growth prospects, but different operating and regulatory environments lead to a fragmented financial service offering.
For instance, SA has an advanced banking and financial services sector and should be a catalyst for growth in places such as Mozambique and Botswana through the deployment of solutions that support these regional hubs.
As a universal bank, we cannot view our value proposition in isolation. We cannot have an advanced personal banking environment and then a high-friction business banking offering that is ultimately servicing the same client. If our customers and partners are doing more transactions we are helping them grow their businesses and drive economic activity.
We are entering an exciting era for transactional banking in Africa, and technology innovation is driving us to build stronger, lower-friction and more efficient markets. We see our value proposition increasingly being delivered through a regional model, where the local environment nuance is supported by the strength of the Pan African expertise.
African economies are stronger despite the challenges on the continent, and we look forward to being a key role player that unlocks even more value in the coming years.