3 minute read
Fintech Digital-only banks
Digital banks trying to overcome what Bettr CEO Tobie van Zyl describes as “40 years of oligarchy”, which saw South Africa’s banking industry monopolised by the Big Four, have a tough road ahead. It is not only the longstanding legacies of well-entrenched brands that pose potential barriers to these industry newcomers, but also the loyalty factor: South African consumers are typically reluctant to change banks.
However, Van Zyl is confi dent that consumers will soon recognise the advantages offered by digital-only banks, from lowered costs (made possible because they don’t need to support the same infrastructure as their physical peers) to being geared to meeting client needs in a world that increasingly eschews the traditional linear progression of study loan, car loan, home loan. “Traditional banks are still trying to be all things to all people, but we can leverage data to deliver simple products that match a consumer’s experience,” explains Van Zyl.
He believes that banking is set to take on a different shape in the future, especially now that cryptocurrency has established itself as a legitimate currency, giving credence to digital banks in turn.
BANKING on DIGITAL
Are online banks able to measure up to their brick-and-mortar counterparts, especially when it comes to security? Lisa Witepski investigates
Consumers need not fret about security, thanks to the stringency of South Africa’s banking regulatory environment, and the requirement that fi ntechs are expected to adhere to capital requirements and ally with a banking sponsor.
Andre Hugo, CEO of Spot Money, points to another innovation gathering pace: open
FAST FACT
By 2025, the adoption of digital payments could accelerate to
banking. He 67 per cent – a signifi cant describes this rise from pre-COVID-19 as a banking estimates of platform that 57 per cent. is unaligned to Source: Bain a specifi c bank, meaning that it can partner with a range of fi nancial service providers. “It’s a marketplace where highly personalised fi nancial services such as banking, loans and insurance can be coupled with lifestyle services, rewards and a range of intuitive services,” Hugo explains.
CONTACTLESS PAYMENTS
With cash seen as a vector in the germ-phobic COVID-19 era, contactless payments are coming to the fore.
The trend had already started to gain traction before the onset of the pandemic, according to Paul Behrmann of Pay ex. In South Africa, 83 per cent of consumers expect more exible payment options from banks, according to GlobalWebIndex. Those expectations are increasingly being met: Nicho Bouma of Pay@ points to RFID technology that allows point-of-sale payments with your phone (think Apple Pay and Samsung Pay). Then there are QR-based contactless payments like SnapScan, Zapper and MasterPass.
Bouma believes that there is a big future ahead for contactless payments, especially among young, tech-savvy consumers. However, trust is – and always will be – a big issue. That’s why MasterPass remains the most successful of available technologies, he says; as a digital banking standard, consumers don’t have to be persuaded to download it onto their phones, as with other apps.
The good news is that work is being done on a standard that will open the gates for digital payments among retailers.
EYEING THE THRONE
Even so, Murray Gardiner of Bluecode Africa maintains that it will take a lot to dethrone cash: “Cash is cultural, cash exchanges instant value, cash can be re-exchanged instantly and cash is not visible to the tax authorities. To replace cash requires much more than consumer convenience.”
But there’s more to emerging technology than that. “If we want to drive digital transformation for the vast majority, our banks have to open access to their customer accounts to a new account alternative to the legacy cards, not just a QR push payment when eventually the Real-time Retail Payments Platform is realised,” Gardiner says. He argues Murray Gardiner for a new digital account payments clearing house to provide a real scheme-level alternative to the card system. This would make the system more accessible for micro-merchants, helping to unlock their potential and stimulate wealth creation, jobs and consumer choice for the wider community.
