What do you see as the key value being driven from digital?
In terms of value generation and value defence, there isn’t an aspect of the business at Absa that doesn’t involve digitisation. Over the last 2 to 3 years there’s been a fundamental shift in how we see digitisation, not just as a lever for cost reduction and driving efficiency but also to maintain and improve on the customer experience. So, the key value being driven from digital is a combination or a balance of the two. If you’re driving the digital agenda purely for the sake of capturing efficiency, often it can be done at the expense of high-quality customer experience.
Two examples come to mind where we have ensured a combination value generation and defence. The first is that during the pandemic we had customers who had a lot of questions and queries around the payments relief programme. So, we had to quickly leverage freed up capacity from other parts of the business and redeploy it to provide our customers with the comfort, security and guidance that they were looking for. If you approached that purely from an efficiency point of view you wouldn’t have actioned that.
The second example is the recently launched Absa ID, which streamlines risk management, identification and verification. We did not do this purely for the sake of not having a back office- although that was an outcome. Ultimately our approach was to enhance the customer experience. All of these initiatives are an important part of digitising the business but it’s really about creating value in different ways for our clients.
How have you driven your digital agenda and the relative investment in digital vs. other areas?
It’s been fundamental for us to always link our digital agenda to the strategy. How you deliver digital and use it to solve problems is very dependent on the strategic context. We have been clear that the beginning of our digital journey was about catching up and therefore speed and agility were important. So that’s why we had a lot of programmes delivered by the business and why we got such fast traction. As we draw that current phase to conclusion, our next set of initiatives are much more integrated, and it will require us to look at digital in a much more consolidated way.
From an investment perspective the important thing is to outline how much investment needs to go behind the various objectives, instead of just doing digital for the sake of digital. So, outline how much you want to invest behind an objective like accelerating revenue or reducing risk costs and then from there you can look at the role digital will play in meeting those objectives.
A mistake that we have seen being made is when you spend money on creating all sorts of cool gadgets and you don’t know what to do with them. You constantly have to ask yourself if it’s scalable to 10 million people in South Africa.
As a Group, what have been the big bets or the biggest investments in digital that have been made over the last few years?
From a Group perspective there are 3 main big bets or investments: 1) data infrastructure, 2) migration to cloud and then 3) digitising business processes.
Firstly, a large amount of investment has gone into our data infrastructure which forms a very strong foundation for us to build on our data science capabilities. Out of all the banks I would say that Absa has the most sophisticated infrastructure in the country. Second is the migration to cloud - retiring some of the old network storage solutions and migrating it into the cloud. The Retail and Business Banking environment has a lot of complexity from a migration perspective but as an initiative it’s progressing well and there’s a strong commitment to that work. Lastly, we have worked to digitise many of the business processes, whether it be vehicle asset finance, home loans or CRM.
Other initiatives we have focused on is resetting the digital channels capability. An example of is our mobile banking app, which is now one of the best in the country in terms of stability and user-friendliness. Overarchingly, we are now looking towards the next horizon. Instead of just focusing on catching up we are now looking to start leading.
On a scale of 1-5, how do you rate how well Absa has digitised?
We have been included in a number of digital maturity benchmarks over the years and have made tremendous progress in this space. We are not a leader in all dimensions as yet, but we have been improving in areas like project management maturity, the way we use data, how we approach design or how we include design thinking.
I would say that when we started measuring it about 3 years ago, we were a 1.5 out of 5 and now we are more at a 3.5 out of 5.
How much more can digital contribute to the Financial Services industry going forward?
I believe we are just getting started and there is still plenty to do. Digital is not an end-goal but rather a tool to help you evolve the business. Banking has been around for at least 2000 years, and we have always found ways to optimise. The experience will continue to improve and digital is a key part of that.
From a client perspective what do you see as the key drivers or demand?
Many banks are pushing towards becoming a ‘one-stop-shop’ but you need to be pragmatic about why you are here and what sustains the business. I do agree that it’s important to start diversifying and there is value in finding synergies through additional businesses, but I think that requires a careful balance. You need to first focus on becoming a good bank and laying those foundations.
What are the key threats of digital going forward?
From a digital perspective data privacy and cyber threats are very top of mind for us and both will pose a huge challenge. Additionally, we are seeing the threat of new players operating in traditional financial services, which will have an impact to the overall revenue pool.