The battle among South African banks over clients has intensified and at least part of the fight is being fought on the digital front.
Last week Absa launched ChatBanking on WhatsApp - on which customers can pay beneficiaries, check their balance, get statements and buy airtime or electricity. The platform now boasts about 10,000 registered customers since it started operating in early July.
CEO Maria Ramos, speaking to Business Times at the release on Tuesday of the bank's first set of interim results since its split from Barclays, said while digital offerings were not the only frontier, Absa wanted to respond to its customers and to where the competition was going.
"We need to be digitally scalable, and it's not just about product on the app side but also how we create the efficacy in the back end . in terms of processing, in terms of robotics and in terms of the way we think about using data much more intuitively and as a game changer, so we can predict better. That's what this is really about."
Ramos said Absa was doing a number of these things but needed to be able to do it better, saying customers wanted banking products that were faster and could be used at their convenience. This was evident from the growth in usage of WhatsApp banking.
Absa was also looking to deliver digital innovations to business clients, particularly in the small and medium enterprises payment space.
The big four banks have taken different routes when it comes to digital innovation. Standard Bank has invested more than R20bn over the past few years in overhauling the back end of its banking system, while FNB, Absa and Nedbank have tinkered on the front end with apps and online services.
Jan Meintjes, portfolio manager at Denker Capital, said the large expenditure lay in the upgrading of the back end and only time would tell which strategy would position which bank better to take advantage of further digital integration.
Standard Bank's expenditure on infrastructure has made it fit for purpose for the digital age, Meintjes said. The upgrades have allowed the bank to do real-time processing, and handle greater transaction volumes.
Meintjes said what the market had seen from the other banks were visible changes to the "feel and service level" the client gets. But the question remained whetherAbsa, Nedbank and FNB were spending enough on upgrading back-end infrastructure, he said.
"Standard Bank would claim they have an advantage in the speed it can follow market dynamics when there is new technology that comes on board. The other three are in a situation where they have not addressed a lot of their legacy issues and it could slow them down if technology changes very quickly," said Meintjes.
Fred Swanepoel, chief information officer (CIO) at Nedbank, said over time it was not necessary to replace the back end, andvalue came from the front end.
He said current digital offerings were not a determiner of market share but would become more of a factor.
"Digital to us is not front end versus back end. We have layers of digitisation throughout our infrastructure," he said.
We think the digital strategy is increasingly important
— Mike Brown - Nedbank CEO
Swanepoel said they would also be launching WhatsApp banking soon. He said they had had an issue over data privacy, but that had been resolved.
Nedbank's digital offering was particularly important for the bank and was considered a key focus for its retail and wealth management businesses, CEO Mike Brown said this week.
"Particularly on the retail side we think the digital strategy is increasingly important in maintaining and building our customer base," he said.
Brown said Nedbank clients wanted a variety of methods to transact from branch to mobile and they would continue to offer that but there would be an increasing emphasis on the digital channels.
Nedbank's Money app has been downloaded more than a million times and Brown said at the release of the group's interim results this week the bank had added more than 42 services to the app this year.
During the six months to June, Nedbank spent or allocated R6.8bn to software systems. This spend has already exceeded what the group spent last year.
Absa CIO Jacques Barkhuizen said digital offerings like the WhatsApp ChatBanking were needed for banks to be competitive.
But unlike the apps that are downloaded and have limitations on what can be done on the platforms, ChatBanking is versatile. Absa had started simple, but the platform allowed it to build on it and expand the number of services.
"It's a bot at the heart and soul of it and at this point in time [it's] here to deliver transactional services. Going forward, why not, 'Hey, Absa, I would like to buy a brand-new car or get insurance.'"
Barkhuizen said Absa planned to roll the product out across the group's regions elsewhere in Africa.
Standard Bank has partnered with WeChat, China's biggest internet-based mobile messaging platform, and offers services including money transfers, prepaid electricity and airtime purchases.
Absa also announced that it partnered with Samsung South Africa to introduce Samsung Pay, which allows Samsung Galaxy smartphone users to make mobile payments.
This year FNB launched a paperless process to opening a bank account - by simply taking a selfie. FNB Pay has also now added the ability to read the QR codes of mobile payment platforms. FNB is also working with Garmin and other makers of wearable technology to allow tap-and-go payment.
Paul Mitchell, fintech and blockchain lead at PwC SA, said the standard of service that customers had come to expect from using digital platforms like Facebook and Google would be expected from the big banks.
The big four banks in the country have a large customer base, but Mitchell believes that some customers are experiencing very different levels of services and interaction on their phones.
He said the number of new banks that were being launched or would be launched - Discovery Bank, Bank Zero and TymeDigital - were being built from a digital- and customer-oriented perspective, while incumbents were having to go digital with their current legacy systems.
"The expectations [of existing big banks] are higher because they offer more services." So it's much harder to offer all products on a digital platform "and they have to do it across all their channels and integrate with all their operations. So it's harder to integrate," he said.
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