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Regulation and the ‘uberisation’ of banking

Nedbank exec says technology is changing branch structures and requires reskilling of staff.

The ‘uberisation’ of banking is said to be fast approaching, with experts seeing financial technology rocking the foundations upon which the industry is built. But regulation appears to be buying incumbents time to react and, more importantly, prepare for the future amid ever-changing conditions.

“The world is changing around us. That is the reality with technology, it is changing all industries and we’re not immune to it. The one thing that banks have is they’re highly regulated so, in many ways, any space around how banking evolves is going to be shaped by the rate at which regulation simultaneously evolves,” said Ciko Thomas, group managing executive for retail and business banking at Nedbank.

Although fundamental transformation in the industry is expected, the rate at which regulation evolves is forcing banks to think differently about the role of innovation and technology, he said.  

He added that disruption is more likely to come from within banks themselves, largely as they understand the regulatory environment and as consumers – increasingly used to the convenience and speed of digital services – foist change upon them.  

However, meeting consumer needs in a country with both a tech- and financially-savvy population as well as an unbanked population requires a careful balancing act. A 2016 FinScope study on Financial Inclusion in South Africa found that the country appears to be financially inclusive on the surface, with 77% of adults holding bank accounts. However, if South Africa Social Security Agency (Sassa) card holders are excluded only 58% of the adult population is banked.

To this end, the bank continues to invest in bricks and mortar branches. Having built a basic branch powered by solar energy in a small town 60km from Umtata in the Eastern Cape and a high-tech, digital-only branch at the Gautrain station in Sandton, Thomas explained that the bank tailors the branches that it builds to meet the needs of different communities and banking capabilities.

Per the bank’s financial results for the six months ended June 30, it increased the total number of digitally-focused branches in its network to 303, with 48% of all outlets having been converted to new-image branches.

Thomas told Moneyweb that the bank does not see technology rendering branches obsolete but rather sees the nature of the services provided through branches changing. Nedbank was the first bank on the continent to introduce video banking some four years ago, with 267 stations nationwide currently servicing around 50 000 video calls per month. It plans to roll out a further 70 stations in 66 branches by 2020.  

In addition to video banking, the bank’s financial services businesses are exploring robo-advisor and chatbot technology as a means to drive down the cost of doing business in its middle and back offices. But Thomas said such technologies are unlikely to replace people entirely.

“People think it is [either] the robot or the person. But people need to recognise that as banking [evolves] – the way that we interface with our people and the way that our people interface with clients has become different – a big premium is placed on a multi-skilled workforce.

“A lot of our thinking and even training programmes focus on how we can skill people across all aspects of the bank so that we can move people…. There is a constant effort at saying [let’s] rather reskill people to do value-adding things to the lives of clients rather than doing mundane back office things. Every single person that we have to move out of an operational or repeat task role, we train in a customer interacting, value-adding manner.”  

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