Customers win when banks go to war

Christoph Niewoudt, FNB Consumer Segment CEO
Christoph Niewoudt, FNB Consumer Segment CEO

The ability of SA’s banks to survive and thrive depends on their willingness to demonstrate that they are wholly on the side of their customers, writes Christoph Nieuwoudt

The next few months promise to be a hugely exciting time for banking customers in South Africa.

While it’s unlikely that the economic pressures associated with rising inflation, increasing petrol prices and far too many hours of load shedding will ease up in the immediate future, there is at least a financial silver lining to look forward to.

I’m referring to the imminent launch of several new banks in the country.

As is the case with any industry, increasing competition in the banking environment will undoubtedly create a more vibrant and dynamic financial sector.

In many ways, an injection of healthy competition can spark something of a reawakening within existing businesses and can serve as a catalyst for even higher levels of innovation, and, most importantly, customer centricity.

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Which is why the ability of any of South Africa’s existing banks to survive and thrive in the months and years ahead depends fundamentally on their willingness and capacity to demonstrate that they are wholly and absolutely on the side of their customers.

Of course, while the introduction of a swathe of new banking role players brings exciting possibilities for consumers, banking customers are by no means in infinite supply in South Africa, which means the new banks will have to migrate customers from existing banks by giving them tangible reasons to change allegiance.

On eBucks alone, customers’ rewards are up to R2 billion a year, and this has a massive impact on those who need help.

Similarly, incumbent banks are known for being highly competitive, and have entrenched and continue to integrate themselves in relationships with customers.

This is perhaps prevalent in their heavy investment in technology to land customer-centric platforms with advanced data analytical decision-making ability across credit, customer interaction and customer value management, to mention only a few areas.

While new banks will most likely have the benefit of the doubt until they are fully operational, incumbent banks have the network effect of huge data sets and the ability to interconnect customers – business and retail, employers and employees, sellers and buyers, and so on.

Incumbents also have established brands and reputation to leverage.

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This is by no means a scale that new entities can replicate overnight, regardless of the perception of lower barriers to entry by being digital.

Broadly, if we look at the South African consumer market, our country is unique and has real structural and economic nuances that existing banks have been navigating for years, with relative success.

For instance, while the current top five banks have compelling digital offerings, most of their sales of especially transactional accounts, investments solutions and insurance products are still heavily skewed towards assisted service channels, mainly branches and private banking suites.

Digital, of course, plays an important role in providing access to banking services, and remains the most cost-effective and safer channel for customers in the long term.

Hence, new banks will believe that they have a chance to scale much faster as they don’t have legacy infrastructure and other systems.

In our view, there’s still a need for a multichannel strategy for long-term viability.

While infrastructure carries a relatively heavy cost base, the smart use of such infrastructure can become a competitive edge for a bank, and FNB is a case in point.

We increasingly see the impact of smart deployment of infrastructure and other resources on our growing customer base, many of whom regularly use our branches for assisted or self-service for a range of services.

We explain this through the adage that we’re “digital when you want it, but human when you need it”.

In this context, the role of front-line staff evolves from performing transactions for customers, to helping and advising customers on money management.

In an increasingly competitive environment, value propositions will be put to the ultimate test as customers continue to demand maximum value for a reasonable price.

While price remains a dominant factor considering the negative impact of South Africa’s poor economic activity, and while entry-level transactional banking has become extremely affordable, it will be detrimental for any new player to assume that banking customers pay little to no attention to value.

Digital, of course, plays an important role in providing access to banking services, and remains the most cost-effective and safer channel for customers in the long term.

We are seeing this first-hand in our business as customers are increasingly relying on value-added services to stretch their monthly budgets.

On eBucks alone, customers’ rewards are up to R2 billion a year, and this has a massive impact on those who need help.

On a more practical level, our strategy to remain competitive is quite simply to continue our well-established growth path, irrespective of what is happening elsewhere in the markets.

To do that, we have clear plans in place to retain and grow our already very strong core transactional client base, primarily through the combination of proven service excellence that underpins an innovative product set.

We also recognise that one of the essential keys to maintaining our market leadership position in the coming years is our ability to keep on providing best-in-class digital channels and transactional platforms that ensure our customers have easy and affordable access to transactions, retail savings and banking products that can improve their lives.

Of course, we will also become even more protective of the deep and trusting relationships that we have established with all our customers as we recognise that these relationships are the bedrock of our retail banking offering.

In the face of increasing competition, banking customers will be the main beneficiaries.

The current wave of increased competition is only the beginning of the true disruption that the financial services sector will experience.

Nieuwoudt is CEO of FNB Consumer Segment


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