For the longest time, established banks seemed immovable from their perches. Their positions were solid and the cost to take them on remained prohibitive. A rift is, however, emerging among banks in Africa as small specialist challenger banks are set to storm ahead of their larger rivals, producing better returns as they target underserved markets, explains Andries Brink, CEO of Andile Group Holdings.
“Banks increasingly view other banks – rather than non-bank entrants – as their main competitive threat. New challenger banks are now perceived as the leading competition. There is also a growing acceptance that companies providing new financial technology could help banks alleviate competitive pressures, but traditional banks face challenges working with these companies, because their internal procurement process is a major hurdle to successful collaboration,” says Brink.
According to Brink cheaper technology, the shrinking presence of international banks and a population demanding better financial services will cause a rise in African based challenger banks that will take the lead from the continent’s more traditional banks and foreign competitors.
“Many don’t realise that an opportunity has arrived for African challenger banks that could spark a dramatic change in the established order. For several regions, the 2009 financial crisis was a curse that brought heavier regulation to the finance industry. One of the consequences was a refocusing of international banks’ core assets. Due to regulation, they’ve been forced to look at how they allocate capital within their global banking operations.
“As a result of such reallocation of capital, numerous services had to be removed from non-core markets, including Africa. This action expanded the vacuum in an already under-exposed and underserved banking sector in Africa. According to the Global Finder Database a staggering 66% of Sub-Saharan Africans did not have a bank account in 2014,” says Brink.
He says small national markets, lacking minimal financial literacy, poor judicial systems and low-income levels all contributed to this situation. Meanwhile, a fast-growing young population with a taste for technology hints at a vast untapped market. “Traditional banks don’t have the agility to tackle that opportunity and it can often cost them dearly, as seen with Barclays’ exit from the region. But challenger banks have a chance to shine.
“Challenger banks can be more agile. They can focus on specific services, which reduces their regulatory burden, and they have the flexibility to move with small yet active markets. Large international banks are sometimes too big to succeed in nuanced markets. But local challenger banks have the attitude, the grassroots view and the ability to move fast.”
Brink says the technology required to run a bank used to be very expensive, but this is no longer true. “Along with 2009’s tightening regulations, the less expensive technology shifted fortunes in favour of challengers. Systems that used to cost hundreds of millions of dollars can now be acquired for not even tens of millions.
“Since challenger banks don’t have the enormous legacy of established banks, they can leapfrog their competitors without the restrictive technical debt. Mobile systems, true Know Your Customer capabilities and other opportunities wait to be explored. Challenger banks are characterised by their ability to focus more closely on the customer journey. Their access to technology galvanises that advantage.
“Challenger banks are not a fad or a blip. Many are attracting significant investments, motivated by their nimble nature due to lack of technology legacy. This shouldn’t be understated: technology is arguably any financial institution’s biggest expense – even more than staff costs – due to the regulatory complexity that has to be navigated. Any opportunity to cut back on that cost is a massive boon.
Incumbents know this. According to the 2018 Temenos survey, banks cite challenger banks as their top competitive threat. That’s higher than other incumbents and fintech start-ups.
Brink says the technology and experience is available in Africa for challenger banks to make the leap forward. “We have good solutions on offer and have partnered with some of the leading fintechs in the world to tailor the available solutions for our customers in Africa. Recently with cloud and our Financial Markets Fabric, we are able to significantly speed up the rate of change at significant savings to our customers.”
Brink says as the big banks focus their energies elsewhere, an entire continent with a booming population and many unbanked customers and underbanked corporates demands attention.
“This is a huge opportunity, a place where small banks can take the lead and win over customers. The game has changed. The technology is accessible and moving faster than ever. We often hear talk of how financial services are being disrupted by new ideas. This is one of the big ones. Challenger banks, by finding their groove, will spearhead growth in our region by driving trade and trust.”
Queues and cash-only frustrate SA’s commuters
A new study by Visa reveals the success factors for improving travel and creating smarter cities
The use of cash-only payments was
Visa, in collaboration with Stanford University, came up with these findings in one of the largest global studies examining the growing demand for public and private transportation, and the important role digital commerce plays in driving sustainable growth.
According to the UN[i], by 2050, 68
Building on Visa’s experience working with transit operators, automotive companies and technology start-ups, Visa commissioned a global study, “The Future of Transportation: Mobility in the Age of the Megacity” to better understand the challenges commuters face today and in the future. The key findings were combined with a view of existing and near horizon innovations provided by experts at Stanford University, to better understand the technology gaps in addressing their pain points.
The South African Perspective
Payments lie at the heart of every form of
Aside from cash-only payments, another commuter frustration when paying for public transport has been long queues – 67% of Johannesburg commuters and 64% of Cape Town commuters. Over the last few years, a number of mobile-driven taxi-hailing apps have been launched in the South African market to counteract these concerns and commuters are open to the possibilities presented by mobile apps. The Visa study echoed this by showing that 77% of Johannesburg commuters and 76% of Cape Town commuters would be willing to try a consolidated app to make payments for public transport.
Mike Lemberger, SVP, Product Solutions Europe, Visa says: “The future success of our cities is intertwined with – and reliant on – the future of transportation and mobility. Visa and our partners have an important role to play, both in streamlining the payment experience for millions of commuters around the globe, and supporting public transportation authorities in their quest to build sustainable and convenient transportation solutions that improve the lives of the people who use it.”
Herman Donner, PhD and Postdoctoral Researcher from Stanford University co-authored the report and summarised: “When looking across the technology landscape, there already exist many products that could easily address people’s daily frustrations with travel. However, none of these solutions should be developed in isolation. A major challenge therefore lies in first identifying relevant technologies that provide suitable products for the market then managing implementation in conjunction with a broad set of stakeholder including mobility providers, technology companies, infrastructure owners and public transport agencies. From our research, we think that many of these small, incremental changes have the potential to make a significant difference in people’s daily travel, whether it’s to help find parking, get the best price to refuel their car or plan their journey on public transportation.”
Click here for the detailed global findings.
Women take to tech, but more needed
By HAIDI NOSSAIR, Marketing Director META, Dell Technologies
$12 trillion – that is the value in additional global GDP that remains locked behind the gender gap. This is according to the latest Women Matter report from McKinsey, which also reveals startling disparities in the workplace. Even though women make up more than half of the human population, only 37% contribute to GDP on average – and in some countries that proportion is significantly lower.
The reasons for this can be put in three areas. Fewer women – 650 million fewer than men – participate in the global labour force. Women are also more likely to be in part-time employment and thus work fewer hours. Finally, female employees are more common in lower-productivity sectors than in higher-productivity areas. Are women not being offered the opportunity or are they holding themselves back?
Among STEM careers this ratio is particularly dismal: only 24% of engineering professionals are women, and as few as 19% of careers in ICT are filled by women.
What is the cause of this? Studies have found that women pursuing STEM careers are higher in countries with more oppressive policies towards women, because those careers hold the promise for financial freedom and more social autonomy. In contrast, countries with progressive attitudes towards women tend to produce fewer female STEM graduates. Then how can we encourage women from early ages to take the path of STEM education? And how can organizations ensure women have equal opportunity at the hiring stages.
Certainly addressing gender inequality is crucial and must not stop.. Where women are increasingly more part of the workforce, there are often still barriers preventing them from assuming higher management roles. Female entrepreneurs often struggle more to gain investment capital. Corporate cultures are rarely aligned with the pressures of balancing work and family obligations. Decision makers may simply lack exposure to the potential of female candidates. Female pioneers have also argued that women are too risk-averse when compared to men.
Whether these assertions are true is a matter for debate – and that’s exactly why every professional man and woman should be talking about them and identify action to change the status-quo. This is not just about female rights, but about social upliftment: companies with a mixture of male and female leaders perform better across the board and companies in the top-quartile for gender diversity are 21% more likely to outperform on profitability.
The digital economy we live in today represent a golden opportunity for increased women contribution to the workforce as technology breaks the boundaries of location and time for the workplace and where labor intensive jobs may today be performed by data scientists.
For two days in March, top professionals will gather to talk and exchange ideas around creating more roles for women, larger appreciation for female professionals, as well as counter the attitudes among women holding them back from greater career success and autonomy.
If you want to be part of this conversation, join the Women in Tech Africa summit today at the Century City Conference Centre in Cape Town – learn more at https://www.women-in-tech-africa-summit.com/ and use the code DELL20 for a 20% discount.