The future of banking: Where will we go

South Africa’s banking landscape has evolved and changed rapidly over the past couple of decades.

The Big Four – Standard Bank, Nedbank, Absa and FNB – have dominated for years, but the rise of Capitec has upped the ante and now competitors from the insurance sector are stealing market share – Discovery offers a credit card facility, Old Mutual offers a Money Account and MMI has partnered with African Bank to offer credit to customers.

But there’s more competition to come, not only from the insurers – traditional banks need to watch their backs because if they’re not going to offer what the new disruptors are willing to offer, they may well get left behind.

Here is what you can expect this year and beyond:

EMBRACE TECHNOLOGY

Lyndon Subroyen, the global head of Investec Digital, says: “The consumerisation of technology and the impact that has on nonfinancial services is shifting the expectation of clients to ‘everything should work like Uber, be as fast and real-time as Google and connected like Facebook’. This is the driver of how banks will think in the future.”

Consumers are asking for more and it all needs to be better and faster.

“That’s why you are seeing a rise in cryptocurrencies – they encourage the free movement of money. There’s a slow movement to the removal of cards as the battery life of phones becomes more trustworthy. Contactless transacting is quite widespread,” says Subroyen.

That’s not to say that banks haven’t been innovative at all. We have the ability to bank online and through our smartphones using various apps, chip and pin technology enables us to approve amounts without having to use our signatures, and chequebooks are a dying concept.

These days, everything can be done with just the touch of a button and the more banks embrace this, the more we’ll move away from cash and the use of cards.

IT WON’T MATTER WHO YOU BANK WITH

One of the next big things will be “open banking”. In the UK and Europe, a piece of legislation called Payment Services Directive 2 has enabled this phenomenon.

“This will allow massive entrepreneurialism between the banks, as well as more competition. It will set up the infrastructure for the competition to thrive. The end result will be that all of the banks here have to open up their systems to allow third parties to get in,” says Subroyen.

So, for example, if you happen to like the benefits of Standard Bank’s transactional accounts but want a home loan with Capitec and a savings account with Old Mutual, you should be able to see all your accounts in one app so that you can transact between them and move money around seamlessly.

MORE COMPETITION

The Big Four banks have a loyal following, but this may all change as competitors move into the South African market. Many have tried and failed to appease a sceptical South African consumer, but now the competition has one advantage: knowledge of the South African consumer.

For example, Bank Zero, which is set to launch at the end of this year, is chaired by former FNB CEO Michael Jordaan. Bank Zero will be an app-driven bank that promises to add control and transparency.

Others set to enter the banking space include Discovery, which applied for a banking licence last year.

Postbank and Tyme, backed by Patrice Motsepe’s African Rainbow Capital, are also set to make an impact in the local banking sector.

YOU WILL SAVE MONEY

Bank charges have always been a gripe among South African customers, but that is set to change.

When asked if there was a hint in Bank Zero’s name, Jordaan says: “Yes, there is a hint in the name, especially for all electronic fees and card swipes. Naturally, all will be revealed at the launch.”

YOU WILL GO CASHLESS

“It was Bill Gates who said banking is necessary but banks aren’t. It took a long time for his prediction to become a reality, but a whole host of financial technology upstarts are challenging the entire banking value chain, while cryptocurrencies could even challenge central banks,” says Jordaan.

That doesn’t mean that all commerce will be cashless.

“Cash is convenient for small transactions, while others like the fact that it is anonymous. But electronic transactions will become cheaper, even free, and also involve less hassle than cash.”

YOU WON’T NEED YOUR BANK

Systems such as Paypal have afforded us the ability to transact and receive money across borders for a while, and other companies such as Google are now offering digital wallet platforms and online payment systems.

Gerhard Oosthuizen, the chief technology officer at Entersekt, says: “A lot of companies are starting to offer banking-as-a-service offerings, which means a consumer brand can now much more easily offer banking services, thereby disintermediating the banks [getting rid of financial intermediaries].

“All of this is good for the consumer because banks will need to enable all manner of features. We’ll see the boundaries of banking start to blur and more people choosing digital-only providers.”

YOU WILL USE YOUR VOICE TO TRANSACT

We mostly use our computers or mobile devices for banking, but, according to Subroyen, there will be a shift off that to chat, artificial intelligence and voice-based systems.

Personal digital financial assistants will be available to users 24/7, and they won’t necessarily be provided by your bank. For instance, Google Home is a powerful speaker and voice assistant that plays music and calls friends if you ask it to, so its ability to make payments for you one day is not that far-fetched.

YOU WILL BENEFIT FROM MORE SECURITY

Fraudsters and thieves have always been one step ahead. But the one benefit to moving from cash to digital is that it can be traced more easily.

“Cash is not traceable, but if I tell you to make a [virtual] payment, there is a digital footprint left behind. Technology will give us a better insight,” says Subroyen.