ES­TAB­LISHED COM­PA­NIES HAVE TO ADAPT, AS CON­SUMERS WANT SIM­PLER AND PER­SON­ALISED PROD­UCTS Fin­tech keep­ing banks, in­sur­ers on their toes

Fi­nan­cial tech­nol­ogy is chal­leng­ing es­tab­lished fi­nan­cial ser­vices com­pa­nies in two ways: new play­ers are bring­ing low-cost, dig­i­tally based so­lu­tions to mar­ket quickly, and con­sumers are de­mand­ing prod­ucts that give them greater choice and flex­i­bil­ity. K

Pretoria News Weekend - - OPINION -

THE RISE of fi­nan­cial tech­nol­ogy (fin­tech) has forced South Africa’s banks and in­sur­ance com­pa­nies to look at their value propo­si­tions, to meet the de­mands of chang­ing con­sumer be­hav­iour.

A study by pro­fes­sional ser­vices firm Price­wa­ter­house­C­oop­ers (PwC) found that South African banks were con­tin­u­ally rein­vent­ing them­selves. Dig­i­tal so­lu­tions, low­cost op­er­at­ing models and sup­ply­chain in­te­gra­tion have moved to the top of the banks’ busi­ness agen­das, with non-tra­di­tional play­ers pur­su­ing var­i­ous as­pects of these trends, en­abling them to pro­vide their cus­tomers with in-house bank­ing so­lu­tions.

Jorge Ca­ma­rate, a part­ner in PwC’s fi­nan­cial ser­vices divi­sion, says the abil­ity to launch of­fer­ings eas­ily and quickly strength­ens the need for the es­tab­lished banks to re­view the speed at which they launch prod­ucts.

“The evo­lu­tion of tech­nol­ogy and in­creased cus­tomer ex­pec­ta­tions, com­bined with the emer­gence of dis­rup­tive com­peti­tors, are plac­ing sig­nif­i­cant pres­sure on the bank­ing in­dus­try to im­ple­ment new strate­gies to re­main rel­e­vant in the fu­ture,” Ca­ma­rate says.

PwC says the fol­low­ing three trends could have an im­pact the bank­ing land­scape:

• The emer­gence of dig­i­tal so­lu­tions with lower-cost models launched by ad­ja­cent fi­nan­cial ser­vices play­ers – for ex­am­ple, Dis­cov­ery Bank, which will be launched next year.

• The emer­gence of sec­tor- and in­dus­try-spe­cific banks, closely in­te­grated with broader sup­ply chains, launched by non-fi­nan­cial ser­vices play­ers – for ex­am­ple, the South African Post Of­fice.

• The on­go­ing trans­for­ma­tion of the tra­di­tional banks to ad­dress chang­ing cus­tomer, reg­u­la­tory and tech­nol­ogy needs.

Cur­rently, In­vestec is the only bank in South Africa with a prin­ci­pally dig­i­tal (branch­less) of­fer­ing, but it will be joined by Dis­cov­ery Bank and po­ten­tially Tyme in 2018.

Ac­cord­ing to the Bank­ing As­so­ci­a­tion of South Africa, the South African bank­ing sec­tor cur­rently com­prises 17 reg­is­tered banks, two mu­tual banks, 14 lo­cal branches of for­eign banks, two co-op­er­a­tive banks and 43 for­eign banks with ap­proved lo­cal rep­re­sen­ta­tive of­fices.

In re­cent years, life assurers have in­creas­ingly shifted to­wards bank­ing. Ex­am­ples in­clude Dis­cov­ery’s credit card fa­cil­ity, Old Mu­tual’s Money Ac­count that dou­bles as a trans­ac­tion and sav­ings ac­count, and MMI’s part­ner­ship with African Bank to of­fer needs­based credit to its cus­tomers.

PwC says at a time when the The Cen­tre of Ex­cel­lence in Fi­nan­cial Ser­vices this month re­leased a re­port that in­ves­ti­gated the im­pact of dig­i­tal dis­rup­tion in South Africa’s fi­nan­cial ser­vices sec­tor. It pro­vides an anal­y­sis of fin­tech and dig­i­tal adop­tion across core bank­ing func­tions, in­ves­ti­gates how fi­nan­cial in­sti­tu­tions are re­spond­ing to this, and con­sid­ers the im­pact on reg­u­la­tions.

Mark Brits, the di­rec­tor of cen­tre, says there is a sense that we are be­com­ing more open to fin­tech in­no­va­tion, but only grad­u­ally.

“In South Africa, the Fourth In­dus­trial Rev­o­lu­tion is see­ing in­cum­bent banks lever­ag­ing new tech­nol­ogy to make things fast, smarter and less ex­pen­sive for their

Dig­i­tal so­lu­tions, low-cost op­er­at­ing models and sup­ply-chain in­te­gra­tion have moved to the top of the banks’ busi­ness agen­das.

cus­tomers, to en­hance their ex­ist­ing of­fer­ing,” Brits says.

The Cen­tre of Ex­cel­lence iden­ti­fied the fol­low­ing changes in these key bank­ing func­tions:

• The re­port found that the de­vel­op­ment of smart­phone pay­ments through dig­i­tal wal­lets and mo­bile bank­ing apps was al­low­ing cus­tomers to store card de­tails dig­i­tally and trans­act us­ing their phones.

• The re­port found that an al­ter­na­tive lend­ing land­scape was emerg­ing in the credit mar­ket that pro­vides ways of as­sess­ing credit and se­cur­ing

Pay­ments. De­posits and lend­ing.

fund­ing from lend­ing prod­ucts out­side the bank­ing sys­tem.

• Re­tail trad­ing plat­forms are pro­vid­ing al­go­rith­mic trad­ing ca­pa­bil­i­ties, and “copy trad­ing” al­lows less ex­pe­ri­enced in­vestors au­to­mat­i­cally to repli­cate the trades of more ex­pe­ri­enced in­vestors.

• Robo-ad­vis­ers are au­tomat­ing the guid­ing in­vestors’ de­ci­sions by cal­cu­lat­ing risk pro­files and pro­vid­ing a for­mu­laic fi­nan­cial plan or in­vest­ment port­fo­lio.

Cap­i­tal rais­ing. In­vest­ment man­age­ment.

ka­belo.khu­[email protected]

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