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Consumer costs set to plunge as South African banking industry evolves

The paperless model means lower operating costs for banks.
Temenos is a world leader in banking software, with 270 clients across Africa and a footprint in South Africa. Picture: Shutterstock

While the South African population is already 80% banked, there is a huge appetite for alternatives in the country and challenger banks are rising to the occasion with digital, branchless offerings. This, in turn, is making the big five traditional banks revise their banking models to meet the consumer demand for customer-focused, simple, easy banking.

Erwin van Helden, head of payments and digital channels for Temenos Middle East and Africa, points out that the big five banks – Standard Bank, First National Bank, Absa, Nedbank and Capitec – have a large established footprint in the country already. “So, while banks in other African countries are looking to capture the unbanked population, in South Africa, it’s about the number of available banks increasing and competing for existing market share,” he says.

Van Helden points out that the paperless model, making use of the cloud environment, means lower operating costs for the banking industry, which the challenger banks can turn to their advantage. He says turning banking into a ‘single click’ activity and removing the need for branch visits is the way of the future. This would mean making banking an easy ‘one-click’ customer experience.

“While the challenger banks have an opportunity in terms of meeting the need for faster, more convenient banking, they will need to offer better service, cheaper lending rates, and higher savings interest rates than traditional banks in order to maintain a competitive advantage,” he explains.

Van Helden notes that in the long term, the size of the South African banking market will stay the same in the sense that most consumers are already banked. But we are likely to see the market share being redistributed as these new players enter the market. “The upshot for the consumer will be a reduction in the cost of banking as players become more competitive,” he says.

Temenos is a world leader in banking software with 270 clients across Africa and a footprint in South Africa. In December 2018, Temenos acquired Avoka, a leader in digital customer acquisition and onboarding, to strengthen its digital front office offering. In January, it announced the launch of two new products: Temenos Infinity, the major next step in the award-winning Temenos Digital Front Office product, and Temenos T24 Transact, the most comprehensive core banking product leveraging the most advanced cloud-native banking technology.

Last year, Temenos was ranked the market’s leading software provider in a range of reports from Forrester, Gartner and IBS, covering core banking, digital banking and channels. 

Challenger banks shaking up the industry

The South African banking landscape is evolving with the emergence of innovative digital banking players such as Discovery Bank, TymeBank and Bank Zero. Also known as the challenger banks, “these banks are poised to meet the demand by consumers for quicker, convenient, cheaper bank services,” Van Helden says.

  • TymeBank: This fully digital bank went live in February and has entered the market through a network of partners including Pick n Pay and Boxer stores. Chief executive Sandile Shabalala says that by the time TymeBank completes its bank kiosk roll-out, there will be 730 points of presence where customers can open accounts inside a Pick n Pay or Boxer store. “Even in stores without a bank-enabled kiosk, customers can still do their everyday banking transactions. There are over 14 000 till points across the Pick n Pay and Boxer network, where our customers can withdraw money free of charge and deposit money for just R4,” says Shabalala.
  • Bank Zero: Founded by former First National Bank CEO Michael Jordaan and headed by a team of former FNB top management, Bank Zero is set to launch in the second half of this year. After receiving its banking licence, the bank announced that it is integrated directly into the system of the South African Reserve Bank, giving Bank Zero the ability to function as both a clearing and a settling bank. This means Bank Zero clients will be able to move money between their Bank Zero account and accounts at other banks more efficiently and in real time. The bank will also be making use of the cloud for certain banking functions.
  • Discovery Bank: Launched in March and boasting the title of the world’s first behavioural bank, Discovery Bank will also have a digital footprint rather than a branch network. Chief executive Barry Hore says the distinction between Discovery’s behavioural bank and loyalty programmes offered by other banks is that Vitality Money is designed to incentivise people to save, invest and live within their means to improve their financial sustainability. “This is unlike other bank rewards programmes that instead incentivise higher spending and require clients to have multiple products with a single institution,” he says.

Lessons from sub-Saharan Africa

“The high level of banked consumers in South Africa means that the model is different to those seen in other sub-Saharan countries, where there is a significant demand for mobile banking,” Van Helden says. The leader, by far, continues to be Kenya where a central bank survey earlier this year showed that access to financial services had risen to 83%, largely on the back of mobile money service M-Pesa.

However, M-Pesa’s foray into the South African market through a partnership with mobile operator Vodacom failed to gain traction and was shut down in 2016. Instead, the South African banking industry bears a greater resemblance to European and Western banking industries where conventional banking leads the financial services industry.

“As the banking model in South Africa evolves, the success of the challenger banks is not a foregone conclusion. Instead, these banks are likely to serve as a catalyst for innovation and reduction of legacy for the larger, established banks,” Van Helden says.

The industry is already seeing this impact. For example, Absa launched WhatsApp banking last year, which allows users to perform instant transactions using the bank’s ChatBanking service, available on Facebook Messenger, Twitter and WhatsApp. The service allows clients to view their bank balance, buy electricity, airtime and data, as well as make payments to listed beneficiaries.

“Banks will only be competitive when they are able to reduce legacy and improve services. It’s all about optimising the customer journey and customer experience to keep the customer engaged,” Van Helden concludes.

Brought to you by Temenos.


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More and more, the banks are taking over services that were performed by SOEs, like Home Affairs ( for passport applications and the Post Office for credit card deliveries etc. this will not only dilute job opportunities in the public sector and increase opportunities in the private sector but will still require bricks and mortar and paper transactions…traditional banking ain’t going anywhere it’s just changing its focus to do more than banking.

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