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Consumer confidence: digital’s ticking time bomb

Consumers need to know the benefits of new tech, writes LORNA HARDIE, regional director for Sub-Saharan Africa at VMware.

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BAs we march headlong into the fourth industrial revolution it is important to reflect that history favours the brave. As much as we would like to believe that new disruptive technologies will change the future as we know it, we must look back at how certain technologies shaped the modern consumer before we can even fathom how new advancements will do the same.

If we take the likes of AI (artificial intelligence), Blockchain and the Internet of Things (IoT) there is still a consumer disconnect in terms of how they will impact their lives versus the palpable excitement that the IT industry feels about their rise. So, what is missing? The key here is education.

The consumer impact

Ultimately as a business you develop and create products and services that will at some stage have an impact on a consumer. Even if you are an industrialist who is building bearings for car manufacturers, your bearings will at some stage of their lifecycle be in a car driven by a consumer. If we take this example and apply it to technology, it is quintessential that as business we understand how the consumer feels about technology disruption, their perception of concepts like AI and blockchain and whether or not they have any idea of the true impact on their lives.

At VMware we recently ran a consumer survey in EMEA, where we turned to consumers to get a better idea of how they feel about this new digital frontier we are in. Accordingly, 46% of respondents said that technology was at the heart of their daily lives, recognising its benefits in a multitude of areas. Further, 53% realise this is driving a better customer experience with businesses, such as banks, retailers and even doctors and 50% of respondents also highlighted that they believe new technology can improve environmental issues such as climate change (50%).

But to every positive there is a negative, and 50% of consumers (taken from representative samples in UK, France and Germany) just don’t understand enough about the use and impact of these disruptive technologies. A whopping 45% of the public believe that AI ‘is a robot’ and fear its rise, in the same way SkyNet rose in the cult classic Terminator.

Consumer confidence

In 1879, a scientist and the president of the Stevens Institute of Technology, Henry Morton, stated publicly that one man’s tinkering was a “conspicuous failure” – the man he was referring to was Thomas Edison and the invention in question was the light bulb. Other inventions like the car, talking in moving pictures and even liquid nail polish were met with the same cynicism.

So if history is anything to go by it is no wonder that if we consider technology in banking alone, only 7% of respondents to the survey would give AI control over their money, even if meant they could save money quicker and 65% are scared or nervous about their bank having access to completely accurate data about their daily lives.

Now factor in the fact that reports locally by PWC and even McKinsey highlight that the South African consumer is one of the most cautious in the world – this means that we as business have a big job on our hands.

Capitalise on change

The onus is on us to transform the way the consumer feels and engages with new technologies and solutions. We need to educate them in terms of the positives, communicate the mechanics of how it works and speak specifically to the benefits.

We know the fabric of innovation is a digital foundation built in the cloud and powered by apps and services that combine new technologies to build life-changing experiences and superior products. But your consumer needs to know what impact these will have on their daily lives, that they can trust these apps and that no – AI is not a robot.

Take a look for example at the new Investec advertisement that speaks to data and its role in changing our lives; but then it also comes back full circle to the fact that the company still sees its consumers as human beings, who they will service face-to-face (if needed) and where they are not just considered a number.

Software has the power to help march the world forward, but there would have been no point in building the car if they did not put a steering wheel in it. The consumer is the first step in the new digital frontier and as much as we build apps, services and products for them – we can’t leave them behind in our excitement – even when building solutions for the digital workforce.

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The shape of the SME future

What does the future of technology look like for South Africa’s SMEs? COLIN TIMMIS, general country manager of Xero SA and a professional accountant, looks into the tech crystal ball

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Over the past decade, technology has radically changed the way businesses operate. Now, even small businesses have access to powerful tools that were previously expensive or complicated.

The pace of change has been rapid – and it’s unlikely to slow down. Businesses must keep up with technology to stay competitive. According to research conducted by Citrix, 92% of companies across South Africa’s key industries agree that digital adoption directly affects company profits. However, 54% still feel unprepared for the future.

So, what does the future of technology look like for South Africa’s small businesses? How can the other 46% of companies prepare?

5G and WiFi 6 – faster internet speed

In the foreseeable future, we will see a rapid increase in the use of fibre across South Africa. According to Xero’s State of Small Business Report produced with World Wide Worx, 49% of small businesses surveyed used ADSL connections and only 37% used fibre. When asked to describe their internet connections, 45% said they were ‘great’, while 43% said they were ‘okay but not 100% reliable’. 57% of those who said their connection was ‘great’ were fibre users.

South Africa is still playing catch-up in terms of internet connectivity and speed. However, WiFi 6 is set to improve the way routers distribute traffic to connected devices and increase the transfer speeds by around 30%. For when you’re on the go, 5G is the next generation of mobile data standard. It’s already being trialed by South African carrier Rain, and a broader rollout is expected in 2020.

Machine learning and Artificial Intelligence – more efficient software

Even if you aren’t aware of it, you’re probably already using smart software which leverages machine learning (ML) and artificial intelligence (AI) in your business. While only a tiny proportion of respondents (0.25%) from Xero’s State of Small Business Report say they are using them, most businesses are aware of how important they are.

AI and ML are great at taking large amounts of data and spotting patterns that humans might miss. They help businesses cover some of the more routine tasks so they are freed-up to focus on the most important priorities. For example, tedious tasks like bank reconciliation, can now be completely automated.

Blockchain – safer, more secure transfers

If you hear ‘blockchain’ and think ‘cryptocurrency,’ you’re not alone. However, the technology also has something to offer when it comes to existing payment technologies. Through its complexity and high level of encryption, integration with blockchain can make transferring valuable assets more secure. It can also be used for more effective fraud prevention and other security-focused tasks.

The cloud – access data everywhere

Cloud computing is starting to become a standard part of life for many small businesses in South Africa today. According to Xero’s State of Small Business report, 19% of respondents surveyed make use of cloud technology. Of these respondents, 98% reported a significant increase in profit thanks to adopting this technology – and 99% identified an increase in efficiency.

The trend towards cloud adoption is likely to continue as we see the development of technologies, like faster speed through fibre, WiFi 6, 5G, and machine learning powering it.

Integrated financial software

When it comes to accounting in a small business, these new technologies will enable much smarter ways of working. Take bank reconciliation, for example, where cloud storage and machine learning will search through documents and expenses on your behalf to compile reports.

Eventually, we will be able to access everything we want in one integrated, seamless hub. We can see this development through the use of app integration. Xero has 800+ apps already compatible, which enables small businesses to automate, gain better insight and grow their businesses all through one ecosystem of partners.

Access to capital

Open banking, the process of banks and financial services opening their APIs to the market, will shape how businesses access funding. By sharing their financial data instantly, potential investors have immediate access to a company’s revenue, profits and cashflow – enabling them to make fast, informed decisions.

Platforms like Xero keep all of a company’s financial data up to date. That way, when the company needs to file for a loan their documents are ready to go. Xero is also continuously pursuing new partnerships to help fuel small business growth. Earlier this year Xero partnered with three new alternative lenders, to help improve access to funding.

Digital adoption offers an island of stability in the volatile South African economy. Technology allows businesses to run more efficiently, remain globally integrated, and maximise their profits. Companies which keep up with the latest technology, from incorporating it into their processes to training staff, will have a real advantage over their competitors.

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Cash is here to stay, and other trends shaping payments

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As we enter the next decade, local and African merchants should support payment methods that suit their customers, rather than following global trends just for the sake of it. Peter Harvey, MD of payment service provider, DPO SA, looks at five trends we can expect over the next few years.  

  • Cash is here to stay – for now

Despite common perceptions, South Africa still has more than 11 million unbanked individuals and cash remains the preferred payment method for these and many other customers. 

Harvey says: “As we enter 2020, we can expect a host of new digital payment technologies that sound like excellent options – and they may well be for some – but merchants need to carefully monitor their customer behaviour before they rush to try the latest gadget or fad.”

According to Harvey the banks and card companies like Visa and Mastercard will be placing a large focus on enticing consumers to move from cash to card-based payments in the coming years. 

“Overcoming the reliance on cash will take a fair amount of time and effort,” says Harvey. “For merchants trading in a cash-based community, depositing money into a bank that tracks your spending, charges you to store your money, and then charges you again to withdraw it can seem unattractive. At the end of the day consumers will make their decision based on convenience, cost and risk.” 

Card payments are expected to morph over the coming years. In South Africa the tap and pay method is becoming more commonplace. Harvey believes this and other near field communication (NFC) methods of card payments will continue to grow in use as shoppers become more trusting of the technology and retailers see the efficiency benefits of moving customers through their purchase cycle more quickly and easily. 

  • Mobile is still king 

There is no doubt that the means to facilitate most digital payments in Africa will depend on mobile technology. 

According to South African communications regulator, ICASA, South Africa has a smartphone penetration of 80%. In Sub-Saharan Africa meanwhile, the mobile phone penetration is 50% and the GSMA expects smartphone penetration to grow from around 40% to 66% in 2025. 

Harvey says smartphone technology and wearable technology will allow for the growth in some of the newer payment tech, like Apple Pay and Samsung Pay, but these payment methods will remain in the hands of the top LSMs and have little effect on the bottom of the pyramid customer base. 

“For the moment USSD technology will still underpin the majority of mobile payment methods. Until smartphones increase in penetration, payments like m-Pesa will continue to dominate. Customers know and trust the solution and its these types of offerings that will need to be beaten by any new entrant over the next two to three years at least.”

  • New decade, new banks 

Harvey is upbeat about the new digital-only bank offerings like Tyme Bank, Bank Zero and Discovery Bank. 

“It appears that 20Twenty was two decades too soon,” says Harvey. “The local markets are now finally ready for a new digital offering without the fuss and cost of the traditional offering. These banks stand a good chance of making an impact and making headway towards financial inclusion in the country.”

Harvey believes, that in order to boost the number of people using digital payments, the banking institutions, merchants and payment service providers need to start incentivising consumers to make the switch. Loyalty and Rewards will start playing an even bigger role in the near future.

  • New services for the payment ecosystem

Based on demand, Harvey believes forward thinking payment service providers will work closely with their banking partners to focus on providing their mutual merchants with a ‘fully managed service’. This service includes: instant sign-up; a full suite of payment products; risk screening; account reconciliation; anti money laundering checks; access to shopping cart plugins; and a variety of other value-added services in the online digital payment space.  

These services will enable digital retailers to quickly and easily start selling their services online, while protecting them from the associated risks.

The service benefits the banks as well as the broader digital ecosystem, as the payment service provider actively monitors and manages merchants and transactions, removing risk from the process and facilitating ‘good’ transactions.

  • Identity technology takes centre stage

Looking at newer technologies, Harvey believes biometrics will continue to be the key focus.  

Harvey says voice and facial recognition are set to take off in South Africa in 2020 and 2021 and he believes the key driver in this regard is the increasing use by the government. 

“Banks and Home Affairs teaming up for the renewal of ID documents and passports is a major win for the average citizen,” Harvey says. “This falls neatly into the ‘convenience’ motivator and as people use and trust the biometrics used by the banks for this service,  they will become less afraid to try it for payments.”

As technology rapidly improves, the payments ecosystem can expect some exciting advancements over the coming decade. Chat commerce and even augmented and virtual reality developments will almost all come with payment features. However, Harvey cautions against over exuberance. 

Harvey says “Make sure you cater for what your customer actually wants, not what you think they should want. If working closely with African merchants, banks and customers has shown us anything, it’s that the fastest way to drive away business, is to dictate how customers pay. Provide the options and let them choose.”

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