How has digitalization changed the expectations of clients and shareholders?
I’ll answer in two parts.
The first is that digital has shifted to becoming part of business as usual. It’s a capability that’s expected to be there 24/7 and it’s expected to be easy. These expectations are being set by various industries and big tech firms and not necessarily financial services companies.
Since the pandemic, the uptake of digital has been cross-generational so everyone is more comfortable trying things. Both early and late adopters are all online now. So, if you have problems with systems then you’ll see a migration and loss of clients who will go to other providers. The more you connect your digital experience seamlessly, the closer your client will feel to the business. For example, if you have 40 apps and you bring it down to a super app, then customers will feel more comfortable and you will have solved a pain point for them. Clients are looking for the experience and ease of digital, not just the transactional aspect of it.
The second part, from a financial services perspective, is that investor communities are starting to look at how you are progressing in terms of becoming a digital company and not just a financial services company with branches and physical infrastructure. Shareholders are not just looking at your financial results in isolation. They are looking at digital KPIs like social inventory, data science, modelling, or behavioral capabilities. The dialogue between investors, client communities, and company are becoming even more important.
How have you driven your digital agenda and the relative investment in digital vs other areas?
For Standard Bank, our digital agenda has been driven both from a top-down and bottom-up perspective, with bottom-up forming the majority. There’s nothing wrong with a bottom-up approach but ultimately it needs to be combined with the toolbox standards and system infrastructure that are defined from the top down. If you’re a combination of different businesses then this model can work well. However, if you’re an integrated financial services business that is looking to build platforms with shared value then you must have greater discipline and rules around integrating the basics of digitization. At Standard Bank we have fostered this investment in digital throughout the organization at a country and segment level – with the support and guidance of overarching standards set at Group level.
We believe that the system should be fluid enough that no matter where you sign up across the Group – whether it’s in country, at a segment or product level, or on the app – you should have a consistent customer experience throughout. But we have found that this can be challenging to achieve for players like ourselves especially when there is critical legacy technology infrastructure embedded in the organization.
From an investment perspective we have invested billions of Rands in recent years but as an organization we believe there is still the opportunity for even more targeted digital investment. As a financial services business it can be difficult to fund a platform when you’re taking a quantum leap. If you’re funding it through a combination of cost-cutting and investment, it’s not realistic that there will be an immediate impact to the bottom line. So, there is a balance to strike in unlocking capacity for investment while maintaining our commitments to shareholders. However, there is an argument that financial services companies could tap into additional ways to drive their digital transformation such as partnerships or alternate funding mechanisms.
On a scale of 1-5, how do you rate the value generated by digital?
A huge amount of value has been unlocked already but there is still significant upside to be unlocked for customers and shareholders. For Standard Bank, I would put us at a 3/5 as of today - given there are large opportunities to scale our significant innovations across the continent.
We are not short of innovations or ideas. We have thousands of innovations across the group. We have some incredible digital solutions, from Shyft, an app-based forex wallet to Unayo, a digital platform for day-to-day transactions and services. The challenge is ensuring that these types of products and solutions are scaled, cross sold, and integrated effectively. As we enhance our artificial intelligence and data capabilities, we believe we can ensure that customers no longer have to go looking for those products, the product can come to them.
Do you think there is still a lot of potential in South Africa to digitize?
There is a huge amount of potential to digitize in South Africa as well as the continent and we haven’t even begun to tap into the partnership potential with the likes of insurance, telecommunication, technology, transportation, education, or utilities companies. Realistically you have to be a combination of both a follower and a leader in those spaces and if you’re a follower you’ve got to be fast or you could lose market share.
What are the key threats of digital going forward?
Data protection is number one, if you lose the credibility and trust then you have a big problem. The second is increased competition from other non-traditional banking players. The bites they are taking out of the elephant are becoming bigger and bigger. They can now take on your credit and loan business where in the past they would just take on payments. Their differentiator is often ease. You can have the same products but, on their platform, you can open an account or get insurance cover at a click of a finger. The incumbents need to capitalize on their strengths, while continuing to compete and partner with new digital providers in the market.