3 trends that could impact the banking landscape in South Africa

South Africa’s banking industry is rapidly evolving in response to regulatory changes, economic pressures, technological advances and innovation in digital.

“The evolution of technology and increased customer expectations combined with the emergence of disruptive competitors, is placing significant pressure on the banking industry to implement new strategies to remain relevant in the future,” said Jorge Camarate, strategy partner in PwC’s financial services division.

The growth of unexpected players emerging in the financial services industry has created what has been called a ‘marketplace without boundaries’, the financial services firm said.

Non-traditional players are increasingly exploring new opportunities, enabling them to challenge incumbents and continually change the state of financial services in South Africa.

Digital solutions, low-cost operating models and supply-chain integration have moved to the top of the business agenda, with non-traditional players pursuing various aspects of these trends, enabling them to provide their customers with in-house banking solutions, PwC said.

In response to the growing threat in the retail banking industry, the ‘four universal banks’ – Barclays Africa, Standard Bank, Nedbank and FirstRand – are progressively finding new ways to enable them to stay relevant in the market.

Unlike their challengers, the four universal banks have the principal advantage of being able to serve a sizeable share of South Africa’s retail business and corporate banking customers.

In order to maintain this advantage, they will need to develop strong data analytics capabilities and develop new solutions to better meet the needs of their customers, as well as find efficiencies in their legacy businesses to fund the large-scale transformation effort required, PwC said.

Trends in the South African banking sector

Historically, the South African banking sector has been profitable for the four big traditional players. According to PwC, there are three trends developing in the market that could impact the banking landscape, as well as the profitability of these banks:

1. The emergence of digital solutions with lower-cost models launched by adjacent financial services players;

2. The emergence of sector and industry-specific bans, closely integrated with broader supply chains, launched by non-financial services players; and

3. Ongoing transformation of the four banks to address changing customer, regulatory and technology needs.

In recent years, the market has seen other players in the financial services industry diversifying their services offerings by introducing digitally-enabled banking solutions to provide better customer experience at a lower cost.

Non-financial services providers, such as retail and commercial companies, have identified gaps in the financial services market driven by the need for more personalised and affordable offerings than those currently offered by incumbents. This has led to the emergence of non-traditional, sector-specific financial services providers, or banks.

There are a number of examples and cases of a growing wave of non-traditional players realising the advantage of integrating banking as part of their industry supply chain.

For instance, discussions between various taxi associations have begun around the potential development of a solution that can address growing concerns over high interest rates charged to their member taxi owners. This development could lead to substantial disruption in the banking industry.

PwC said that this trend and many others will continue, crossing into different industries as players with sizeable customer bases look for different avenues to grow their share of customer’s wallets through competitive banking offerings.

It said that the four universal banks in South Africa are responding to advancing digital disruption by making significant investments in digital transformation.


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3 trends that could impact the banking landscape in South Africa