People and businesses will always need banking, but, asks PETER ALKEMA, FNB Business CIO, will they always need banks?
People and businesses will always need banking, but will they always need banks? This question is driving a wave of disruption and new thinking in the industry. Discovery has recently announced plans to enter the local retail banking market; telco and tech companies are making similar moves. Fintech is offering completely new ways of doing business and customers are embracing exponential start-ups who offer frictionless, mobile services. Banks are responding with increased digitisation, new lines of business and highly innovative channels. What’s really happening, how will the banking landscape change and when will it take place?
The reason that non-traditional players are getting into main account banking is because of the customer intimacy and insight that comes with a transactional bank account. It’s the one place that all the money goes into and comes out of; businesses put their main account on all their invoices and many married couples don’t even share one! A home loan or insurance policy is important but still just a monthly debit order that doesn’t generate any behavioural insight about a customer. The relationship is also typically low key; you will only hear from your insurance broker on your birthday and only home loans collections department if you miss a payment.
Some banks have taken advantage of this and created additional stickiness through rewards programmes, improved channels and ecosystems of value-adds. Core transactional platforms are at the heart of a bank’s operations. Regulation and banking license approval ensures that banking platforms are robust and well managed. In addition, financial aspects such as capital adequacy and risk controls such as anti money-laundering mean the requirements for running a bank are significant barriers to entry.
The local banking industry is consistently rated very highly and its world class resilience and regulatory oversight provided a shock absorber for South Africa during the global financial crisis of 2008. Internationally, large banks have relied on these barriers to entry to block new entrants but the rise of fintech and trust-disintermediating technologies such as Blockchain is changing this mindset. Looser regulation in the UK is seeing a wave of banking license applications from start-ups and in the US, firms such as Google, Facebook and Amazon are actively launching financial services products.
Arguably much of this activity is still peripheral and the core business of running a large scale bank relies on well established processes. This was true for Kodak in the mid nineties when it employed 140,000 people, sold 85% of the world’s photo paper and was the fourth most valuable brand in the United States. In 2012 it filed for bankruptcy; it got left behind in an industry that was turned upside down by technology and its impact on their customers’ lives and the market. Kodak invented digital photography but they failed to embrace the disruption to their own business model that it caused to the industry. Similarly, the Walkman was the first portable device for listening to recorded music; Sony could have digitised it but Apple’s iPod eventually obliterated it.
In 2000, Blockbuster was the biggest video rental chain in America, and at the time internet startup Netflix offered to run its fledgling online business. Blockbuster turned this down and went bankrupt 10 years later, having failed to move its business from bricks to clicks while Netflix has become a global leader in streaming movies.
South African banks have been very successful at moving processes off of paper, out of physical locations and onto digital channels. FirstRand’s 2016 results indicate that overall electronic volumes increased 13%, while manual volumes grew only 2%. New ways of working are also extending beyond channels to back office operations.
The next decade is likely to be pivotal for the banking industry and it will be driven by the race for the customer and not by the fintech on its own. Digital is just the enabler of new business models built around improved customer centricity that according to Dimension Data’s Digital Advisory is something that banks should avoid just doing, they have to become digital in their thinking, operating models and execution.
Customers expect frictionless processes that are available where they are and not only where the bank is, the transport and accommodation industries have already delivered this with Uber and Airbnb. According to Google, the tipping point to mobile in South Africa happened in 2014 when internet searches from mobile devices exceeded desktops. Millennials don’t stand in queues or fill in forms, they build trust through convenience and they reward customer delight with loyalty and peer group recognition. By 2020 there will be 500 million people in Sub Saharan Africa with connected smartphones; these people will still need banking but it will probably look very different from today.
Rain, Telkom Mobile, lead in affordable data
A new report by the telecoms regulator in South Africa reveal the true consumer champions in mobile data costs
The latest bi-annual tariff analysis report produced by the Independent Communications Authority of South Africa (ICASA) reveals that Telkom Mobile data costs for bundles are two-thirds lower than those of Vodacom and MTN. On the other hand, Rain is half the price again of Telkom.
The report focuses on the 163 tariff notifications lodged with ICASA during the period 1 July 2018 to 31 December 2018.
“It seeks to ensure that there is retail price transparency within the electronic communications sector, the purpose of which is to enable consumers to make an informed choice, in terms of tariff plan preferences and/or preferred service providers based on their different offerings,” said Icasa.
ICASA says it observed the competitiveness between licensees in terms of the number of promotions that were on offer in the market, with 31 promotions launched during the period.
The report shows that MTN and Vodacom charge the same prices for a 1GB and a 3GB data bundle at R149 and R299 respectively. On the other hand, Telkom Mobile charges (for similar-sized data bundles) R100 (1GB) and R201 (3GB). Cell C discontinued its 1GB bundle, which was replaced with a 1.5GB bundle offered at the same price as the replaced 1GB data bundle at R149.
Rain’s “One Plan Package” prepaid mobile data offering of R50 for a 1GB bundle remains the most affordable when compared to the offers from other MNOs (Mobile Network Operators) and MVNOs (Mobile Virtual Network Operators).
“This development should have a positive impact on customers’ pockets as they are paying less compared to similar data bundles and increases choice,” said Icasa.
The report also revealed that the cost of out-of-bundle data had halved at both MTN and Vodacom, from 99c per Megabyte a year ago to 49c per Megabyte in the first quarter of this year. This was still two thirds more expensive than Telkom Mobile, which has charged 29c per Megabyte throughout this period (see graph below).
Meanwhile, from having positioned itself as consumer champion in recent years, Cell C has fallen on hard times, image-wise: it is by far the most expensive mobile network for out-of-bundle data, at R1.10 per Megabyte. Its prices have not budged in the past year.
The report highlights the disparities between the haves and have-nots in the dramatically plummeting cost of data per Megabyte as one buys bigger and bigger bundles on a 30-day basis (see graph below).
For 20 Gigabyte bundles, all mobile operators are in effect charging 4c per Megabyte. Only at that level do costs come in at under Rain’s standard tariffs regardless of use.
Qualcomm wins 5G as Apple and Intel cave in
A flurry of announcements from three major tech players ushered in a new mobile chip landscape, wrItes ARTHUR GOLDSTUCK
Last week’s shock announcement by Intel that it was canning its 5G modem business leaves the American market wide open to Qualcomm, in the wake of the latter winning a bruising patent war with Apple.
Intel Corporation announced its intention to “exit the 5G smartphone modem business and complete an assessment of the opportunities for 4G and 5G modems in PCs, internet of things devices and other data-centric devices”.
Intel said it would also continue to invest in its 5G network infrastructure business, sharpening its focus on a market expected to be dominated by Huawei, Nokia and Ericsson.
Intel said it would continue to meet current customer commitments for its existing 4G smartphone modem product line, but did not expect to launch 5G modem products in the smartphone space, including those originally planned for launches in 2020. In other words, it would no longer be supplying chips for iPhones and iPads in competition with Qualcomm.
“We are very excited about the opportunity in 5G and the ‘cloudification’ of the network, but in the smartphone modem business it has become apparent that there is no clear path to profitability and positive returns,” said Intel CEO Bob Swan. “5G continues to be a strategic priority across Intel, and our team has developed a valuable portfolio of wireless products and intellectual property. We are assessing our options to realise the value we have created, including the opportunities in a wide variety of data-centric platforms and devices in a 5G world.”
The news came immediately after Qualcomm and Apple issued a joint announced of an agreement to dismiss all litigation between the two companies worldwide. The settlement includes a payment from Apple to Qualcomm, along with a six-year license agreement, and a multiyear chipset supply agreement.
Apple had previously accused Qualcomm of abusing its dominant position in modem chips for smartphones and charging excessive license fees. It ordered its contract manufacturers, first, to stop paying Qualcomm for the chips, and then to stop using the chips altogether, turning instead to Intel.
With Apple paying up and Intel pulling out, Qualcomm is suddenly in the pound seats. It shares hit their highest levels in five years after the announcements.
Qualcomm said in a statement: “As we lead the world to 5G, we envision this next big change in cellular technology spurring a new era of intelligent, connected devices and enabling new opportunities in connected cars, remote delivery of health care services, and the IoT — including smart cities, smart homes, and wearables. Qualcomm Incorporated includes our licensing business, QTL, and the vast majority of our patent portfolio.”
Meanwhile, Strategy Analytics released a report on the same day that showed Ericsson, Huawei and Nokia will lead the market in core 5G infrastructure, namely Radio Access Network (RAN) equipment, by 2023 as the 5G market takes off. Huawei is expected to have the edge as a result of the vast scale of the early 5G market in China and its long term steady investment in R&D. According to a report entitled “Comparison and 2023 5G Global Market Potential for leading 5G RAN Vendors – Ericsson, Huawei and Nokia”, two outliers, Samsung and ZTE, are expected to expand their global presence alongside emerging vendors as competition heats up.