Absa dials up the digital as banking's year of disruption dawns
Absa has introduced several digital products to keep up with changing consumer trends, but competition is set to become a lot fiercer as new entrants in the banking sector make their debut.
From the company's ChatBanking product to its Apple Watch offering - and a recently improved banking app that offers home loans, forex and vehicle finance - a better digital banking offering is part of Absa's strategy to grow its market share in retail and business banking since its separation from Barclays.
Last year, Absa extended ChatBanking to WhatsApp (from an initial Twitter and Facebook Messenger platform) to allow its customers to make payments to existing beneficiaries, check balances and buy prepaid airtime and electricity.
But Jan Meintjies, a portfolio manager at Denker Capital, said "the adoption of ChatBanking has not made a meaningful impact. They've experimented with a lot of things including ChatBanking and the Apple Watch app but they have not seen mainstream adoption. Banks like Absa have a large capital base and a substantial client base. They can react to the changes [in terms of digital banking] by experimenting with different products with their already existing client base. They have to be on their toes to make sure they don't fall behind."
Aupa Monyatsi, Absa's managing executive of the virtual channels RBB division, said the bank has seen "good uptake" on ChatBanking on WhatsApp.
"The key drivers of usage are quick payments, balance inquiry and prepaid services such as airtime, electricity, etcetera."
Absa has recently improved its online banking app, making it more "seamless" and "truly paperless" and is launching a new feature that will provide a "slicker way" for customers to switch beneficiaries, he said.
Other traditional banks have also worked on expanding their customer service by adding more digital services. However, with three digital banks making their debut this year, the South African banking sector is likely to face a shake-up.
For the first time in 20 years, three new banks - Discovery Bank, Tyme Bank and Bank Zero - will enter the sector. They will come bearing promises of digital services at low cost, which will keep the likes of FNB, Absa, Standard Bank, Nedbank and Capitec on their toes.
As branchless banks, new entrants will be able to minimise operational costs and so offer lower banking fees.
But low costs alone will not be enough to guarantee success.
Despite the attractiveness of low fees, analysts say brand legacy will play a role in how the new banks will compete against traditional banks that have managed to build credibility.
Neelash Hansjee, a portfolio manager at Old Mutual Financial Services Fund, said: "It's still tough as big banks are established brands that have been embracing and implementing technology over the years to defend their customers. Banks are built on trust and it will take time for the new banks to build trust with the public and potential customers."
Harry Botha, a banking analyst at Avior Capital, said: "Some of the new banks are unheard of [such as] Tyme Bank or Bank Zero. Discovery Bank is a bit different, they do have a brand and people do relate to them. Tyme Bank should have the advantage with the distribution, it's more of a mass-market type of offering so it will over time probably have more customers than Discovery."
Tyme Bank, which began operating at the beginning of the year, was initially a subsidiary of the Commonwealth Bank of Australia. Last year, Patrice Motsepe's African Rainbow Capital acquired full control of the digital bank, which is setting up about 750 points at various Pick n Pay and Boxer stores across SA. These will allow customers to set up their bank accounts and make free transactions at Pick n Pay stores.
Tyme has a no-documentation process when opening an account.
There are no set monthly fees, and free and low-cost transactions. Customers can pay as little as R2 for transactions when using other outlets.
Bank Zero is bringing less-traditional tools to the table to encourage a culture of good financial behaviour.
Headed by former FNB CEO Michael Jordaan, Bank Zero is a smartphone-enabled bank that also has a banking card,
"It will offer all the normal expected [services and products], but also new banking functionality for businesses and consumers and attack high banking fees," Jordaan said.
The mutual bank, which is expected to launch in mid-2019, will cater particularly for "businesses who are a neglected group from a banking perspective" and those users who are "used to Facebook, Instagram and Twitter, which all offer great features without huge fees", he said.
Smartphones will be the primary method of distribution for Bank Zero, with a card to swipe and draw cash at ATMs as well as in stores.
"Fees in SA are much too high and there is still a lot of room for improvement," he said.
On establishing the bank's market share, Jordaan said the bank does not intend to spend huge amounts on marketing. "The focus will be on substance," he said.
Bank Zero will undergo beta testing and will be accessible in mid-2019 based on the success of the testing.
Discovery Bank, due to launch next month, will be based around the Vitality Money app that will reward customers - with discounts on, for example, flights, Uber and retail - for good financial behaviour.
Discovery Bank is likely to have a head start because of Discovery's well-established customer base, Botha said.