Unravelling the payments story

Rewriting the yrostpayments

Standard Bank’s Sajid Gani believes if traditional banks want to take the fight to Africa’s new challengers, they must first understand what transactions are telling them

“Data always tells a story, if you look for the story,” observes Sajid Gani, head of operations for corporate and investment banking South Africa at Standard Bank.

“You have to analyse what the data is telling you, because this will reveal a story, and the most important story to look for is that of your client. What is that story in terms of operational efficiencies, or lack of them? And, consequently, how do you use these insights to make an informed decision that will help you better service your client?”

If banks can listen to those important narratives, he believes they can write operational excellence that other banks could follow, and has allowed Standard Bank to be the author of its own success

a new chapter in their history on the African continent. If not, there’s every possibility they’ll be toast.

Gani has seen a slew of competitors enter the market offering speedy, uninterrupted and cheap payment services to huge swathes of the population who hitherto had no or limited access to mainstream financial services, and among whom there is widespread mistrust of banks.

“With new tech-enabled players, like PayPal, Apple, Google, Facebook, Ripple and other cryptocurrency and distributed ledger providers, and new digital banks providing not only seamless payments, but transparency and cost-effectiveness, too, the writing is on the wall for traditional banks,” says Gani.

That is unless they to wake up to the transformational power that granular data has to improve the customer payment journey and internal processes. And he can point to his own bank’s work with data specialist Intix to demonstrate that. He believes it has provided a blueprint for

THE AFRICAN CHALLENGE

Standard Bank isn’t an outlier. One of Africa’s oldest banks and its largest by assets, it faces the same global challenges as its rivals. But some of them have failed to adapt to the reality of the payments landscape in Africa and the difficulties millions face, believes Gani.

Take cross-border payments. They are a vital local income source, given Africa’s huge number of migrant workers wanting to send desperately-needed funds home quickly to their families. And yet the US $46billion-plus of remittances that cross sub-Saharan Africa every year are subject to some of the highest transaction fees in the world.

“Cross-border transfer has to obviously be done at an extremely low cost. Migrant workers tend not to earn that much

anyway, so every penny really counts,” says Gani. “And it has to be simple, so that the families back home don’t struggle with a process or a technology that they might not fully understand.”

The phenomenal rise in Africa’s mobile-to-mobile transfers, with many providers also offering instant cash-out via a vast network of agents, points to legacy banks’ failure to understand and respond to those needs.

“Banks have to appreciate the nuances of the African unbanked environment, and I’m not sure that they all do,” says Gani.

“In this environment there is genuine mistrust of banks, and concerns about fraud. So, business is typically done informally and there’s a very important sense of community. Banks need to find a holistic solution, to ensure that people, even in the most rural of areas, are able to effectively and comfortably manage their finances and, consequently, their lives.”

That said, the success of those solutions depends on the durability and standards of infrastructure on the continent, while disparate regulatory environments are another challenge.

Newer, more nimble payment companies are likely to find it easier to navigate these hurdles than older, bigger, and more unwieldy banks. But Gani believes traditional banks should, nevertheless, have been better prepared for their arrival.

He says: “A few years ago, cross-border money transfer agencies came to the fore, and were able to offer what banks couldn’t: instant cross-border payments. I guess we should’ve seen the warning signs then. But we were still OK, as banked clients stuck with us, because of the trust and convenience.”

US tech giants, like Apple and Google, and now crypto companies, who are upping their game in the payments arena and extending their geographic reach, are likely to be more testing opponents for Africa’s banks. Many are global brands; they offer a seamless payment process and complementary products to entice consumers – and they are comparatively cheap to boot.

CRACKING THE MARKET

You don’t have to look far for evidence of how fast a simple, low-cost challenge to banks’ payment systems can take hold. M-Pesa is a case in point, says Gani.

An early disruptor, M-Pesa’s m-money

The data insight team at technology company Intix has helped Standard Bank run a comprehensive tracking and tracing service from the moment transactions hit its internal processing. This has not only helped ensure it meets compliance and regulatory demands, but the data insights that Intix software provides have also helped ensure faster transfer times while potential problems, should they occur, are fixed in real-time.

Standard Bank operates two key pieces of Intix software: xTrail indexes all data sources used by the bank and keeps them in a digital repository to satisfy compliance timeframes; xTrace, meanwhile, provides granular tracking of transactions inside an institution, together with all the events in that payment’s lifecycle, and monitors them in the moment.

service now has more than 20 million customers and has held almost 75 per cent of the mobile-money market share in Kenya where it launched nearly 10 years ago, driving the highest mobile-money usage rate on the continent.

What it showed, says Gani, is that the key to success in Africa, is ‘enabling people to seamlessly transact and become financially stable in a way that’s simple, effective, non-bureaucratic, transparent and, don’t forget, cheap’.

TRANSFORMATIONAL INSIGHTS

Yet Standard Bank is successful taking the fight to these rivals and the critical weapon in its arsenal is data.

The payment journey can be mind-bogglingly complex and opaque as it passes across borders, through various portals, payment engines, interfaces and clearing systems. Products such as Swift gpi are already doing a good job of introducing transparency between correspondent banks. But when a payment enters a large institution that’s where the SWIFT tracking ends.

Banks need to find a holistic solution to ensure people, even in the most rural reas, are able to effectively and comfortably manage their finances

Gani likes to refer to this transparent internal payments flow as a ‘glass pipe’ and identifies one of the key benefits it affords the bank as being able to understand the value at risk.

Gani explains: “What differentiates banks is the ability to, firstly, recognise and respond to system issues, and then to quickly gain insights that will help understand the issue through the lens of the client. The sooner we’re able to do this, the sooner we’re able to manage it, migrate it, and, by doing so, minimise the impact to those clients.

“The current journey that we are on with Intix will help create this visibility, and the capability, and it’s a key facet of our drive towards operational excellence.”

Transaction failures and delays can be hugely costly to banks, attracting service level penalties, regulatory fines and, perhaps more importantly, creating reputational risks. By using Intix’s software, the bank can take an informed decision about which payments to prioritise, having understood the extent of the impact of a system or infrastructure outage on any one payment versus another – and to look at that across the entire value chain. This transparency can also be extended to the bank’s customers.

“Once we have a glass pipe in place, the client should then be able to get full visibility and transparency of their payments,” says Gani.

SWIFT gpi for cross-border payments already gives banks the option to embed a transaction tracker in a self-service dashboard for corporate clients. That, combined with the Intix lens on internal progress can provide a real market advantage for a bank.

“Together, they provide end-to-end visibility and transparency and, in this regard, I think the partnership that we have with Intix is absolutely vital,” says Gani.

It’s a particularly compelling proposition, given a growing propensity for corporate customers to switch banks precisely because they want this granularity of information. The banks that can offer this level of end-to-end insight into transaction data might not necessarily grow market share, but they won’t lose it, either.

And that bodes well as Standard Bank starts writing a new chapter in the South African banking story.