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Plenty of juice still to be squeezed from increased digitalisation of South Africa’s financial services

Publish date: 25 November 2021

While digitalisation of banking and other financial services in South Africa over the past decade has delivered benefits to customers and shareholders, there are still plenty of advantages waiting to be gained through the adoption of novel strategies and processes, a new report has found.

Titled Digitalization in Financial Services in South Africa, the report, by consultancy Oliver Wyman and Efma includes contributions from executives at Nedbank, Absa, Capitec Bank, Bank Zero, FNB, Standard Bank, Discovery, Old Mutual and Sanlam.

The report examines recent developments and evolving digital strategies in the sector.  It identifies seven digital plays, using emerging ecosystems and open architecture solutions, to enhance and individualise customer offerings in markets both within and beyond traditional banking and financial services.

“While the benefits of going digital are already significant, there remains untapped value within the South African financial services industry. For customers, these digitalisation opportunities can result in an improved experience together with increased access to convenient products and value-added services.  For shareholders, they present increased profitability through access to new customer pools, new revenue streams and improved client retention,” said Oliver Wyman Partner, Pierre Romagny, who co-authored the report.

It outlines how, in the past 20 months, the COVID-19 pandemic and associated restrictions, which forced changes in behaviour, consumption and how people transact, have accelerated the pace of digital adoption.  The report cites one South African insurer reporting a 470 percent growth in the number of customers transacting on its mobile app between 2018 and 2020.  Similarly, one of the country’s largest banks saw a 200 percent rise in digital transactions between January – August 2020 compared with the same period in 2019.

“This report provides insights on what is a growing, dynamic, and thriving digital landscape in South Africa. Partnering with Oliver Wyman, we were able to talk to decision-makers at top financial institutions and develop a deeper understanding of how far digital has come and where it is taking the country in the future,” explained Efma Regional Manager Middle East & Africa, Fahim uz Zaman. 

In surveying the horizon, the report points to various value-adding opportunities derived from using Open Application Programming Interfaces (a software intermediary that allows application programmes to interact with each other and share data ) with plug-in services to build and orchestrate feature-rich, one-stop-shop customer service eco-systems.  These can be tailored to individual clients and run either directly by banks and insurers or operated as turnkey solutions for third-party partners.  These could potentially include complimentary robo-advisory services. 

“These seven digital plays can provide first-mover advantage by enabling quick and multiple connections with other industries to rapidly adapt to changing market and customer needs. Financial services industry partners must be able to plug in and out easily and provide data to create customer and shareholder value,” said Mr Romagny.

The report notes that the digitalisation and “Open” banking opportunities attract their own risks and threats, specifically for data privacy, cybersecurity and compliance, which financial institutions must understand and protect themselves against if they are to avert reputational and financial institutional damage.

In South Africa, digitalisation also demands transformations in internal mindset and infrastructure to overcome strategy and technological obsolescence. “It requires a complete change in philosophy of what a financial service provider offers and an overhaul in terms of ambition,” Mr Romagny concluded.

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