The country’s fourth-largest bank by assets says it will exact a ‘Goliath’s revenge’ on the digital newcomers attempting to disrupt the industry.
Nedbank CEO Mike Brown expects that the fightback from the country’s dominant institutions will be the defining feature of the competitive landscape for years to come.
“Right now, it’s really sexy to be a new player who has just got a banking licence and who is going to be a fintech and a low-cost provider of banking services. It’s a great story to tell. But how many of these new entrants are going to get to a scale where they are profitable?” asks Brown.
Following a conscious decision by the Reserve Bank to introduce more competition via technological innovation, three new banking licences have been granted to Michael Jordaan’s Bank Zero, Patrice Motsepe’s TymeBank, and Adrian Gore’s Discovery Bank.
The three newcomers — all in different stages of launching — have adopted technology to lower costs and improve the customer experience.
In addition, African Bank is in the process of coming to market with its own comprehensive transactional banking offering, increasing competition in the industry to levels not seen since the years before the global financial crisis.
Brown referenced the book Goliath’s revenge: How Established Companies Turn the Tables on Digital Disruptors and thinks there are many parallels between developments in the local banking industry and what is under way in the global motor vehicle sector.
Elon Musk’s relative newcomer, Tesla, disrupted the dominant incumbents such as Toyota, VW and General Motors with a focus on building high-end electric vehicles. But the company is experiencing difficulties delivering on production targets as it attempts to move into mass-market vehicle manufacturing and achieve the scale required to generate a return on investment.
“Now the incumbents are saying, let’s get the world’s best engineers and production systems that already work for us, and turn them towards electric. That is why it’s the Goliath’s revenge, and I think you are going to find the same in financial services,” says Brown.
Following a number of years in which banks had to spend a “disproportionate” amount of time and money on risk, regulation and compliance in the aftermath of the global financial crisis, Brown says banks globally have begun to refocus on investments into processes and technology that improve the customer’s digital experience.
“The big banks generally, and Nedbank in particular, have put a lot of effort and energy into our technology journey over the last four or five years, and we are at a stage now where we are beginning to roll out to clients products that have been enabled by a much more modular, agile, techstack,” says Brown referring to the technology and systems underpinning the digitisation of the client experience.
Nedbank is investing some R2bn a year in new technology, while Standard Bank has recently completed an overhaul of its core banking platform. Absa is using the opportunity presented in its separation from former parent Barclays plc, to upgrade and enhance its systems as it prepares for new competition.
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