Financial sector can thank Covid for changing the way South Africans bank

If there is one thing the financial sector can thank Covid-19 for, it is the massive consumer switch to digital banking.

New research shows that 86% of South Africans are ready for digital banking, provided that banks provide easy to use and secure channels with accessible human assistance when they need it.

When they were forced to use digital banking when the pandemic started, consumers began to appreciate the speed and efficiency of banking with mobile apps or the internet and banks must now step up and align their services with what consumers want.

According to research conducted by the Boston Consulting Group (BCG) in partnership with Discovery Bank, internet banking grew by a compound annual average rate of 13.6% since 2019 and while financial technology (fintech) 12.2%.

The research report, titled The Future of Retail Banking in South Africa, is based on data and insights from consumers, businesses and global industry experts on the country’s imminent banking revolution.

The research investigated what to expect for the future of retail banking in South Africa and included 1 000 consumers and 400 businesses.

The global market value for internet banking is expected to reach $31.8 billion and mobile banking $1.8 billion by 2027.

According to the report, South African banking has the potential to become fully digital in just five years, enabled by continued regulatory developments, the proliferation of smart devices and advancement of security protocols.

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Are the banks ready for the move to digital banking?

Tijsbert Creemers-Chaturvedi, MD and partner at BCG, says the research found that many South Africans are fully ready to do all or most of their banking digitally, but in a number of cases, their banks are behind the curve.

“Consumers want digital solutions that are not only more intuitive, convenient and secure, but also integrate a large breadth of their banking services into a single ecosystem, accessed through a single interface.”

He says consumers want their banks to redefine service in ways that add value to their lives, especially in personalised, real-time, interactive financial management and in providing cutting-edge fintech.

“However, equally important, consumers want the machine to have a heart. No matter how smart the artificial Intelligence (AI) may be, people want to engage with people, especially when resolving complex, high-value transactions.”

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Doing everything on a mobile app

Hylton Kallner, CEO of Discovery Bank, says hardly anyone today would doubt that at some point in the future, retail banking will be completely digital.

“With the combination of data analytics, digitised services and personalised marketing that is already available, the day is coming when a customer will be able to conduct every bank service imaginable, from opening an account to managing personal finances or from talking to a consultant to finalising a home loan, with just a few taps or a voice command on a mobile app.”

He says while a completely digital banking environment requires supporting infrastructure that includes appropriate regulation, advanced security protocols and high smart device usage, many bank consumers (69%) believe the digital new dawn for South African retail banking will be a reality as soon as 2027.

However, he notes, the market that a bank serves makes a big difference in the digital readiness of its customers.

The wealthiest clients often prefer to engage with humans for advice, while all bank clients also want to know that human assistance is available.

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Including the ‘underbanked’ in digital banking

It is also often too expensive for the approximately 11 million ‘underbanked’ residents of underserved townships or rural areas to go cashless. Kallner says regulatory changes are needed to drive the costs down and ensure all potential users that the cashless system is secure.

How should banks respond?

Kallner says there are multiple business models for the digital age.

“However, what they all have in common is that they have bionic features. The initial client interaction is digital, but human engagement is available whenever it is needed, with technology adding value to human capabilities.”

“Consumers are now ready for a transformation that will redefine what it means to be a retail bank. The question is: are banks ready?” Kallner asks.