THE BANK OF THE FUTURE
Post-pandemic challenges and opportunities in Africa, the Middle East and Asia
The global pandemic has brought sudden and profound disruption to lives and economies across Africa, the Middle East and Asia, while turbo-charging the transformation that was already sweeping through the banking sector. Banks that were already fully committed to innovation before Covid-19 have seen near exponential growth in a range of digital banking services, even as Covid-19 brought once-in-a-century challenges. Different regions will, of course, see different trends. In Africa, in the Middle East and across Asia, leading figures in banking are starting to form a clearer picture of where their focus will need to be in the coming months and years. They are starting to see the bank of tomorrow and the consumers of tomorrow. Daniel Awe is head of the African Fintech Foundry at Access Bank, Nigeria, charged with championing technological innovation in African banking. Right from the start of his own career, almost two decades ago, Daniel was working on what he says were the ‘rudimentary’ beginnings of a tech revolution in banking in Nigeria. And he believes that as technology and the internet offered solutions that allowed African banks to leap (rather than creep) forward, innovation was enthusiastically embraced by a new generation of bankers who were ready to be bolder and act faster than many of their European and American contemporaries. “I remember, early on, we knew, we predicted, the time would come when mobile apps would be widely accepted, when this would be what customers wanted. Today, if you don’t have a mobile app, I don’t think you can even call yourself a bank.”
EARLY ADOPTERS WILL WIN
The African Fintech Foundry head remembers plenty of resistance from more conservative elements. But Mr Awe believes that today, when we talk about the future of banking in Africa and further afield, the lessons of the recent past need to be front and centre and the future will belong to the early adopters of change. “We are already looking at smartphone penetration increasing rapidly, cheaper smartphones in the market, that’s today - so what will the future look like?,” he asks. “I believe we cannot talk about the future unless we talk of regulation, about security, about trust in the technology.” “We are seeing issues around cryptocurrency, new trends and types of fraud constantly emerging, so trust, and we are always asking consumers to trust us, is going to be a huge issue. Security and reassurance are going to be areas that no bank can fall short on.”
THE CUSTOMER OF THE FUTURE IS YOUNG AND DEMANDS MORE
Daniel Awe also believes that we are looking at profound generational change that will see banks have to focus on what younger people expect from their service partners, how they interact with banks and how they want to manage their personal finances, quickly, intuitively and securely. This will mean encouraging younger talent and listening to recent graduates coming into the sector who will understand how the expectations and needs of their generation differ greatly from those of their parents. James Koni iis a seasoned banking leader and CEO and is very focused on the future customer and how the relationship will work. Mr Koni says that while convenience and security are obviously constant themes, what they are also hearing from customers is a desire for their banks to be at the centre of their daily lives, providing the technology and innovation that allows them to deal with matters big and small. “In our markets, in Zambia, in Sub-sahara, we are seeing that big shift, where customers believe their bank should be able to provide everything that is technologically possible,” he says. “Whether that is making a payment, or receiving money, they want to do that using technology. They expect it, and in a way, they are demanding it. If their bank does not provide this, they will vote with their feet.” “Customers are also starting to demand that these services should be free. Or at least, affordable”. “We know that in England, for instance, they have free-banking. In this part of the world, we still charge people to have a bank account. But the customer of
the future will look for a bank that can provide these services free or at a very minimal cost.”
“How do we make this possible? This can only come with scale, with technological innovation, it can only come with striking that balance between providing the service, and how you recover the cost of that, without a fixed charge every month.”
The Atlas Mara Zambia man says innovations such as digital wallet services, without fixed charges, will drive new customer acquisition. Mr Koni believes customers looking for innovations such as an internet banking platform that will allow the instant and secure transmission of documents and instructions such as signature mandates. “If I can send these documents through my banking app, if I don’t have to go to a branch or use DHL, then that’s a very attractive service.”
MAKING IT PERSONAL
Looking further ahead, James Koni says personalisation, offering carefully tailored services and products to individual customers, created by the use of data learnt via Artificial Intelligence, is the ‘next must-have, valueadded service that customers will be demanding.” “For me, just as James, if my bank can use the information they have about me to structure a product or provide advice that is really relevant to me personally, I’m going to really respond to that”. As Daniel Awe and James Koni both say, almost every bank today will talk loudly about having a ‘Digital First’ strategy - but not every bank is turning the words and aspiration into action. Fintan Byrne, CEO of Irish-owned banking software company CR2, says their partners have never been more convinced of the need for a clear, deep and broad commitment to innovation to meet rapidly changing consumer needs. Mr Byrne believes that now - more than ever - a digitalfirst strategy is not just about meeting current customer needs but fully understanding and anticipating the needs of the future.
“With the pace of change we are seeing, in Africa, in the Middle East, in Asia, the question banks need to be asking is not just what do our customers need now, but what are they going to need in six months time, in a year, in five years time?”, says Fintan.
CR2 provides mobile, internet and ATM financial service technology to more than 100 retail banks across the Middle East, Africa and Asia. Over the past two years, Fintan Byrne and his colleagues have had to adapt quickly to the fastchanging needs of their clients and their customers. Often working remotely, CR2’S teams have depended on close, agile and intuitive partnerships, usually built up over many years with their clients. They are also constantly examining trends - a justpublished Whitepaper, authored by analysts Omdia and commissioned by CR2, has highlighted the rapid rise in demand for digital payment and digital wallet services in the Middle East and especially Africa as smartphone penetration grows rapidly. In Kenya, smartphone penetration, currently at 60%, is forecast to rise to over 80% by 2025. Smartphones are getting cheaper, Apps more trusted and popular. These are the trends that are now driving change. Taking a broad view of the sector in the markets they cater for, Fintan says they have seen starkly different approaches taken by banks who are often scrambling to keep up with rapid change. And he believes that those who thrived have done so because they were prepared to seek the best advice, analyse future customer needs and respond not just rapidly, but intelligently.
“There’s no point in investing the money if you won’t invest the time,” says Fintan. “Yes, speed to market is important. But digital banking is a serious challenge and it does require a serious response.”
“We have seen banks who say; ‘ We want to spend the money, but we need it done in two months’ time.” “We know this is not feasible. A shallow response, a quick-fix or a box-ticking exercise is, in many ways, worse than no response at all.” “If you are not going to commit to doing it properly, you will end up causing your business damage, with everything from very poor customer experience and feedback to aborts on log-on and simple abandonment.” In the near future, Fintan believes Apps or (or nextgen ‘Superapps’) will have to be able to offer services beyond traditional money management and cater for everything from online and in-store payments to food delivery and cinema bookings. Digital Wallet services can become a powerful impetus for new customers, driving engagement and interaction, moving banks far beyond their traditional roles and placing them at the very centre of daily lives, in work and play. But Fintan Byrne says these services will need to constantly evolve as digital banking, by its very nature, can never be static.
“We need to be ready to make constant upgrades, to evolve as the expectations and needs of customers evolve,” he says.
“The banks that understand that, and are ready to commit the resources, not just time and money but thought, are the ones that will succeed”.
LOCALISATION AND MARKET SEGMENTATION
Fintan also believes that market segmentation and localisation will play an increasingly important role as change affects different regions in different ways. He believes, for instance, that ATMS will remain a core part of business in many markets. However, in certain parts of Africa, where USSD (text and SMS) phones remain in widespread use, smartphone apps will not currently be useful for already underserved customers. The CR2 CEO says it cannot be a one-size-fits-all approach; “We will see different customer needs and different rates of change, agency banking, for instance, is still huge in parts of Africa.”
“Localisation is very important, but while solutions may differ in regions, we believe they will follow a general continuum.”
Boye Ademola, Partner and Lead for Digital Transformation at KPMG Nigeria agrees that localisation is going to become increasingly important. “I think the bank of the future from a customer perspective is really going to depend on the customer segments,” he says. “What we are seeing now is the personas, behaviours and attributes of customers, as you go through different segments, can vary greatly.” Mr Ademola points to recent experience in East Africa as an example of regional banks and telecoms partners carefully tailoring their products to their customers. “If you look at the mass markets in Africa and beyond the banks in Africa, they want convenience, they want simplicity, they want products that meet their immediate needs and do so in an easy-to-access way,” he says.
“Their product needs are not very complicated, they want loans, as we have seen in East Africa, where Safaricom combined with KCB and NCB to deliver an overdraft product for retail, which has now scaled to millions of customers in Kenya.”
The KPMG Nigeria champion for digital transformation says the product may be backed by complex and careful design, allowing for instant decisions on factors such as credit scoring. But the customer experience has to match the local market.
“When you dig down, you will find that what is important is intuitiveness, on what the customer can do for themselves, whether they come to an ATM, they are on their mobile phone, or with a USSD phone,” says Boye.
“They don’t want to be struggling, spending time trying to work out, ‘how do I do this?’ It’s got to be simple, rapid and intuitive.” Boye Ademola points out that another segment of the market will require more, such as tools for personal finance management, meaning banks will have to work hard to tailor packages and services to clearly defined segments of the market. As the world enters the post-covid recovery, the prospects for the banking sector in Africa, in particular, look good. Analysis just published by Mckinsey & Co lays out three scenarios, one of which would see the possibility of African banks returning to pre-pandemic levels of postrisk revenues by 2022. Mckinsey say strong, rapid recovery is possible, but they list three factors that will be crucial for the banking sector: increasing operational efficiency by at least 20-25%, strengthening risk management, and scaling up technology. In a time of rapid change and great uncertainty, there is agreement on one, clear, issue. The bank of the future, in Africa, the Middle East, Asia and globally, will have to make ‘Digital First’ and ‘Digital Transformation’ more than just buzz words.