If banks want to remain competitive in the face of neo-bank and fintech upstarts, they’ll have to fundamentally change the way they do business to be digital first.
And, if they’re going to achieve that goal, then working with technology partners to ensure that they have the right infrastructure in place will be crucial.
That was the overriding message from the speakers at a roundtable event hosted during the Huawei Intelligent Finance Summit. Through the course of the session, it also became apparent that if traditional banks are to survive in the changing financial landscape, they can’t just put technology on top of their traditional processes and expect to compete and thrive. That’s as true, if not more so, for Africa as it is for the rest of the world.
Meeting your customers on the mobile continent
According to Jason Cao, CEO of Huawei Global Digital Finance, African banks have an opportunity to take advantage of the continent’s mobile penetration rates and increasingly complex financial needs.
“Mobile is the core of everything,” he says, adding that there are similarities between mobile payments in China and in Africa. Futurist and author Brett King agrees that this mobile focus will be important, not just in Africa but around the globe.
“The bank account of the world is a smartphone,” he says. “In 2017, the number of transactions across the Chinese mobile wallet ecosystem passed all of the plastic card transactions in the world for the first time. Half of the world will use a mobile wallet by 2025, credit and debit card use will be down to 30% of global commerce, and cash around 10%.”
Safety is the primary reason for this shift. Secondly, as all the speakers noted, a focus on mobile helps provide the best possible experience for the bank’s customers.
Using a digital-first approach to improve customer experience
“The financial industry should pay close attention to users and their demands, embracing changes,” says Cao.
Someone who has first-hand experience of how taking a digital-first approach can help improve customer experience is Eric Muriuki Njagi, group director: digital business at the NCBA Group, one of Africa’s largest financial services companies.
He points out that, for banks, making the choice to lead with technology is about deploying “money at the speed of trust”.
He explains that the global banking sector has come a long way from 20 years ago when making transactions, particularly those taking place across borders, required either making a SWIFT payment or writing out a physical cheque.
“We now have payments being made instantly or in a matter of seconds,” he says, adding that the same now applies to credit. “We’re now initiating and completing about 6 million loans a day, with an average of two seconds required to complete each one.”
But the NCBA director notes that this kind of speed means very little without trust. In a world where just five percent of fiat currency is made up of hard cash and the rest is essentially algorithmic, that’s especially critical.
“How do we trust the algorithm?” he asked.
Finding stability in the cloud
The answer lies in a concept that Huawei calls “non-stop banking”.
The concept doesn’t just refer to the ability of customers to instantly make transactions but also of the bank to achieve non-stop development alongside ‘non-stop’ innovation.
A good place to start on that front is with stability. As Zhentao Chen, chief technology officer: digital finance at Huawei Sub-Saharan Africa, points out, that’s not something African banks have always been able to take for granted.
“For some of the banks, one year system availability here is around 99%,” he says. That might seem good, but it is as much as 50-60 hours of interruptions. That, in turn, can be incredibly frustrating for customers, especially when those interruptions run up against them trying to make a payment or transaction.
Chen believes banks need to ask themselves: “if our current systems are not so stable, how should we change that?”
Here, moving back-end systems to the cloud can be incredibly important.
“Cloud can help banks bring about zero-downtime financial services,” says Cao, adding that if they’re to get the most out of it, they must realise that, “cloud is not just a technology, but an enabler.”
No time for delay
Ultimately, however, if traditional banks are to compete with fintechs, they can’t just bolt on these technologies. Instead, they must integrate them into a new approach which is entirely digital-first.
“The business of banking is, first and foremost, about being the best possible digital organisation,” says King.
“It’s a mindshift to becoming a technology company that operates a banking license,” Njagi concurs.
Fortunately, more and more players in the banking sector are coming around to that line of thinking.
“Nowadays more and more bankers need to go further when it comes to digital transformation,” says Chen. “We just want to help our customers in the banking industry achieve digital transformation.”
Cao concludes by saying that Huawei is “committed to working with our African customers to focus on the challenges and accelerate digital transformation”.