South African financial institutions (FIs) enjoy a significant trust advantage over potential competitors. Consumers are willing to trade their information for better personalised deals. Banks are well positioned to provide these deals as they enjoy a trust advantage.However, this advantage has a limited window and the race is on to see who will do it first, according to Accenture's 2019 Financial Services Study
A case in point is the arrival of numerous digital banking entrants around the world, such as N26 in Germany, and Monzo and Revolut in UK. N26 has ±3.5-million customers, Monzo about 2.2-million, and Revolut ≥3.5-million. On the insurance front, the US-based firm Lemonade was recently valued at $2bn ahead of its expansion into Germany. There have been two new digital-only banking entrants in 2019, TymeBank and Discovery Bank, with a third soon to follow.
“When it comes to added value, it is crucial to note that SA consumers are highly cost-conscious. When asked what would make them leave their bank or insurer, more cited cost than any other factor,” adds Singh. This is likely partly because South Africans pay more for bank accounts and insurance products than their peers. Raising prices, then, is not an option. To grow revenue, FIs must create additional value for their customers instead.
“South Africans are also eager to see offerings based on their unique behaviour and attributes. About 72% of respondents in the study were interested in receiving adjusted car insurance premiums based on safe driving and 68% in pay-as-you-drive car insurance,” says Jigyasa Singh, financial services managing director for Accenture Africa.
Regarding integrated digital and physical services, 75% of South Africans surveyed – versus 59% globally – want a combined physical and digital engagement, and most also want to be able to speak directly to someone if needed.
TymeBank now offers accounts with no monthly fees and free day-to-day transactions. The bank also enables customers to open an account in minutes at kiosks in a leading retailer, using just their ID card. As a result, the bank is signing over 100,000 customers per month since its launch in February 2019 and is among the fastest growing digital banks in the world. Whilst this is a good example of how FIs can compete in a digital world, long-term success requires an understanding of how South Africans engage with their FIs. Our people want that ideal blend of digital experiences to streamline day-to-day tasks, plus someone available in-branch for more complex requirements especially around financial advice.
The service that ranked third, namely enhanced ecosystems, requires FIs to move away from a one-size-fits-all approach and provide tailored offerings that are rooted in rewards and incentives. Singh explains that personalisation is the 21st century’s gold, as it lies at the heart of such offerings. “Fortunately, in an increasingly digital world, this is easy enough to provide. FIs should however position themselves at the hub of their ecosystems to capture those data flows, because it is this data that will allow them to drive those personalised products and services, and to build new revenue streams. At the same time, it is critical to focus on amplifying their purpose and brand values for differentiation,” she says.
The Accenture Financial Services Study no doubt provides useful information that enables FIs to see what steps peers elsewhere are taking. “But, looking is not enough,” concludes Singh. “To succeed in these disruptive times requires acting.” FIs that follow a truly customer-centric strategy and leverage insights to provide human-centric experiences are far likelier to survive and thrive in this competitive digital era.”
