‘Banks of the future will work like hidden plumbing’
As newcomers invade SA’s staid banking world, the incumbents are reinventing themselves in ways that would have been inconceivable just a few years ago. Rather than erect barriers against the invaders and close themselves off from the innovation that drives the new banks, they are revealing an appetite for co-operation and collaboration.
“Banks are faced with a number of challenges, from changes in technology to changing consumer needs and demands,” says Chipo Mushwana, Nedbank’s head of emerging payments.
“It is partly driven by youth, who consume financial services differently, which changes how you have to deliver. They are demanding easier, cheaper, more transparent banking. They want financial services to be democratised. Banks face decreasing profit margins and tight margins. Meanwhile, they are fighting regulatory hurdles: the South African regulator is one of a few globally that can put you behind bars for making one wrong move.”
Nedbank’s response has been to embrace the concept of open banking, which it sums up as financial institutions opening their data for third parties to access and consume. It requires both a shift in mindset and in technology: Nedbank is using an application programming interface (API), a system that allows software applications to communicate with each other.
“We are the first bank in SA to come out with an API marketplace,” says Mushwana. “We are exposing our API to the back end of fintech companies, and saying we are more than ready to partner and collaborate. We understand you are able to build great
interfaces for customers, and we are comfortable with the fact that we do not own that customer.”
She believes this is the first step towards a strategy of wholesale banking, meaning that big banks become the suppliers of banking services to a new layer of fintech companies that, in turn, become the customer-facing entities.
“What will banks look like 15 to 20 years from now? I think we will be the plumbing pipes that run underground, that everyone knows they need, but not necessarily see. That speaks to the backbone and infrastructure big banks have and that is difficult for fintechs to duplicate and replicate in a short time.”
The API marketplace is a self-service portal that allows developers to create apps, test code, and experiment with the APIs before leveraging them for their needs. It starts with access to Nedbank’s authentication and authorisation service, and then allows the use of specific services like loan applications, extracting profile information, and using the bank’s rewards programme, from a third-party site.
“If open banking solves challenges like remittances and payments at the lower end of the pyramid, it can be a strong driver of financial inclusion,” Mushwana says. “A greater part of the population is still financially excluded …
“At this stage it’s a dipstick, to understand what the landscape of open banking looks like in SA, to see how far we can go, and how much of Nedbank we can expose to this technology environment and community. It’s still a watch and see.”
Open banking arrives in SA and signals major change to the staid old system
Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter and Instagram on @art2gee