Banking has been in existence for thousands of years but generational shifts, behavioural changes and the digital revolution have brought phenomenal disruption to an industry that has been somewhat change-averse, significantly altering how customers view their banking “relationship”.
Then came COVID-19 and global shutdowns, accelerating the already rapid changes that were happening in the financial services sector. Key amongst those changes were digital solutions which sought to solve immediate consumer needs in the COVID-19 environment.
Consider that even before COVID-19, more than 90% of Standard Bank client transactions in South Africa were done using digital channels and in 2019 more than R20 billion was processed via Standard Bank South Africa’s Instant Money transfer Service.
Many moons ago, we held long-distance relationships with our banks. We’d visit their physical branches once or twice a month to make deposits or check balances. Fast forward to today and the picture is vastly different. Now, with most of us working from home, our interactions with our banks are overwhelmingly digital and always on. Going into a physical branch has become a last resort for most banking customers.
The insatiable appetite for banking apps in South Africa and across other regions of the continent has accelerated, as the number of customers who now show a preference for digital over physical spikes because of the lockdown. This comes off the back of increased smartphone penetration and demand for simplicity and convenience on the continent. We are now able to “take” our banks with us everywhere we go in a manner that is easy and safe.
We even have the tools that allow for money to travel across borders and countries – especially important because of families being separated due to international travel bans which are still in place. The ability to make offshore investments has been democratised and can be done through digital platforms. It is no longer only available to those high-net-worth individuals who are clients of international banks.
Before lockdown, we recognised that as more millennials enter the working population, banks have needed to tailor services to meet the needs of these tech-savvy individuals. Catering to the needs of this generation has prepared us to meet the demands placed on banking during the COVID-19 pandemic and it put us in the position to pivot when we needed to.
Millennials are accustomed to an app being available for everyday activities, from ordering food to getting from one place to another. Banks have taken on a relentless approach to upping their technology spend to enable innovation and development of solutions that pander to this demographic. This has spurred entrepreneurial activity in the financial technology sector, where innovative digital solutions are being developed that hold a level of efficiency never seen before.
The days of carrying cash, for example, are long gone and we are now able to make purchases within seconds thanks to clever digital payment technology. All it takes is one quick tap on the screen with your physical card or mobile phone and you’re good to go. With the time-saving benefit Tap and Pay technology offers, it makes sense that there has been a significant uptake of this new payment method.
The traditional model of banking has been flipped on its head. The online bank, with its low overhead costs, can offer affordable banking services to those who have previously been excluded from formal banking services.
But what has been particularly successful in bringing transactional banking capabilities to the unbanked is mobile money. The introduction of e-money services has allowed for the cross-border transfers of money that is faster and cheaper than that of cash and bank deposits. Mobile money rules in Kenya, with 90% of Kenyans over the age of 14 transacting through Safaricom’s M-Pesa.
In the past, a farmer in Kenya residing in the countryside would be subjected to long distances to access the nearest banking institution. The journey to the institution while carrying large amounts of cash would also be characterised by uncertainty and risk. With M-Pesa, the farmer can now store and transfer money safely without having to physically leave their farming operations.
COVID-19 has meant new and unique challenges for banks, but the accelerated evolution and adoption of digital technologies now offer an opportunity to provide financial services at a much lower cost, which ultimately boosts financial inclusion and facilitates productivity gains of economies.
Thought leadership piece
By Kabelo Makeke Head, Consumer and High Net Worth Clients Standard Bank South Africa
Main Image: Standard Bank