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
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.