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SA banks will turn threats into opportunity

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Software AG foresees five probable changes in the banking industry locally and globally that will have a key impact from a competitive and operational perspective, writes GARETH WHITAKER, Presales Director at Software AG South Africa.

Digital transformation is a challenge for all sectors in South Africa, and increasingly so in the banking and financial services industries. This industry has seen an influx in innovative fintech and digital banking competitors, causing the existing players in the industry to reassess their business models.

This year will see the banking sector adapt to keep up with the competition. Banks will continue to find ways to steer away from conventional banking and adapt their approach in a more technologically suitable way for their customers.

Software AG foresees five probable changes in the banking industry locally and globally that will have a key impact from a competitive and operational perspective. Fintechs and digital banks will see conventional banks adapting to the practices of their competitors, and in some cases, acquiring them.

Client data will become a key decision driver 

Client data will become the most valuable asset. Annually collecting data in banks receives significant investment but very few have capitalised on or operationalised this data to generate revenue. Moving forward banks will employ approaches such as predictive analytics and machine learning to achieve this.  This provides banks with real-time opportunities to increase revenue by offering solutions to clients that are customised to their unique needs or to their needs at that specific moment. This mass-customisation approach also uses the data collected to continuously learn and provide automated responses to their customers.

Mergers and acquisitions

Banks are likely to start acquiring fintechs and digital banks that are disrupting their business. Banks have the balance sheets, distribution and greater trust with a broader range of consumers whilst fintechs and digital-only banks have newer and more agile technologies.  These make for a powerful combination, though the cultures are significantly different. It will be an uncomfortable union at first, but the result of this collaboration could prove to have greatly beneficial result.

Liquid assets

Rising interest rates will drive consolidation in mid-tier banks as well as divestitures, as large banks exit less profitable business lines.  At the same time, active asset management is losing market share to the index providers. Automated advisors, offered by long-standing competitors as well as fintechs, pose a further threat to traditional asset management. With the rising interest rate environment, which few active portfolio managers have experienced, there will probably be more automation and consolidation in asset management as well.

Less branches, more value 

Bank branch closings will accelerate as customers increasingly adopt mobile and online banking services. Most banks will maintain smaller, anchor branches to provide a reassuring brick and mortar presence versus purely digital competition. However, as they transform and focus on costs, they will transition remaining branches to low volume/high value activities.

More flexibility 

Regulatory and market forces will ultimately change the way people bank.  Competitive forces globally are seeing leading banks leapfrogging regulation to open up their systems and data, and begin to develop ecosystems of partners.  The result will be greater choice and competition for customers, and the possibility of entirely new revenue lines for retail banks.

Banks will operationalise their data, open and partner up with their competitors and scale back on the physical world to invest in the digital world.  These changes will impact the way everyone approaches banking in the future.

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Money talks and electronic gaming evolves

Computer gaming has evolved dramatically in the last two years, as it follows the money, writes ARTHUR GOLDSTUCK in the second of a two-part series.

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The clue that gaming has become big business in South Africa was delivered by a non-gaming brand. When Comic Con, an American popular culture convention that has become a mecca for comics enthusiasts, was hosted in South Arica for the first time last month, it used gaming as the major drawcard. More than 45 000 people attended.

The event and its attendance was expected to be a major dampener for the annual rAge gaming expo, which took place just weeks later. Instead, rAge saw only a marginal fall in visitor numbers. No less than 34 000 people descended on the Ticketpro Dome for the chaos of cosplay, LAN gaming, virtual reality, board gaming and new video games. 

It proved not only that there was room for more than one major gaming event, but also that a massive market exists for the sector in South Africa. And with a large market, one also found numerous gaming niches that either emerged afresh or will keep going over the years. One of these, LAN (for Local Area Network) gaming, which sees hordes of players camping out at the venue for three days to play each other on elaborate computer rigs, was back as strong as ever at rAge.

MWeb provided an 8Gbps line to the expo, to connect all these gamers, and recorded 120TB in downloads and 15Tb in uploads – a total that would have used up the entire country’s bandwidth a few years ago.

“LANs are supposed to be a thing of the past, yet we buck the trend each year,” says Michael James, senior project manager and owner of rAge. “It is more of a spectacle than a simple LAN, so I can understand.”

New phenomena, often associated with the flavour of the moment, also emerge every year.

“Fortnite is a good example this year of how we evolve,” says James. “It’s a crazy huge phenomenon and nobody was servicing the demand from a tournament point of view. So rAge and Xbox created a casual LAN tournament that anyone could enter and win a prize. I think the top 10 people got something each round.”

Read on to see how esports is starting to make an impact in gaming.

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Blockchain unpacked

Blockchain is generally associated with Bitcoin and other cryptocurrencies, but these are just the tip of the iceberg, says ESET Southern Africa.

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This technology was originally conceived in 1991, when Stuart Haber and W. Scott Stornetta described their first work on a chain of cryptographically secured blocks, but only gained notoriety in 2008, when it became popular with the arrival of Bitcoin. It is currently gaining demand in other commercial applications and its annual growth is expected to reach 51% by 2022 in numerous markets, such as those of financial institutions and the Internet of Things (IoT), according to MarketWatch.

What is blockchain?

A blockchain is a unique, consensual record that is distributed over multiple network nodes. In the case of cryptocurrencies, think of it as the accounting ledger where each transaction is recorded.

A blockchain transaction is complex and can be difficult to understand if you delve into the inner details of how it works, but the basic idea is simple to follow.

Each block stores:

–           A number of valid records or transactions.
–           Information referring to that block.
–           A link to the previous block and next block through the hash of each block—a unique code that can be thought of as the block’s fingerprint.

Accordingly, each block has a specific and immovable place within the chain, since each block contains information from the hash of the previous block. The entire chain is stored in each network node that makes up the blockchain, so an exact copy of the chain is stored in all network participants.

As new records are created, they are first verified and validated by the network nodes and then added to a new block that is linked to the chain.

How is blockchain so secure?

Being a distributed technology in which each network node stores an exact copy of the chain, the availability of the information is guaranteed at all times. So if an attacker wanted to cause a denial-of-service attack, they would have to annul all network nodes since it only takes one node to be operative for the information to be available.

Besides that, since each record is consensual, and all nodes contain the same information, it is almost impossible to alter it, ensuring its integrity. If an attacker wanted to modify the information in a blockchain, they would have to modify the entire chain in at least 51% of the nodes.

In blockchain, data is distributed across all network nodes. With no central node, all participate equally, storing, and validating all information. It is a very powerful tool for transmitting and storing information in a reliable way; a decentralised model in which the information belongs to us, since we do not need a company to provide the service.

What else can blockchain be used for?

Essentially, blockchain can be used to store any type of information that must be kept intact and remain available in a secure, decentralised and cheaper way than through intermediaries. Moreover, since the information stored is encrypted, its confidentiality can be guaranteed, as only those who have the encryption key can access it.

Use of blockchain in healthcare

Health records could be consolidated and stored in blockchain, for instance. This would mean that the medical history of each patient would be safe and, at the same time, available to each doctor authorised, regardless of the health centre where the patient was treated. Even the pharmaceutical industry could use this technology to verify medicines and prevent counterfeiting.

Use of blockchain for documents

Blockchain would also be very useful for managing digital assets and documentation. Up to now, the problem with digital is that everything is easy to copy, but Blockchain allows you to record purchases, deeds, documents, or any other type of online asset without them being falsified.

Other blockchain uses

This technology could also revolutionise the Internet of Things  (IoT) market where the challenge lies in the millions of devices connected to the internet that must be managed by the supplier companies. In a few years’ time, the centralised model won’t be able to support so many devices, not to mention the fact that many of these are not secure enough. With blockchain, devices can communicate through the network directly, safely, and reliably with no need for intermediaries.

Blockchain allows you to verify, validate, track, and store all types of information, from digital certificates, democratic voting systems, logistics and messaging services, to intelligent contracts and, of course, money and financial transactions.

Without doubt, blockchain has turned the immutable and decentralized layer the internet has always dreamed about into a reality. This technology takes reliance out of the equation and replaces it with mathematical fact.

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