Siphiwe Nodwele, MD of Yama Software.

Fintech has lit a fire under start-ups and instilled fear in large brick-and-mortar financial institutions for many years. While agile Fintech upstarts continue to disrupt, big brands have accepted that their competitiveness and relevance depends on their digital transformation roadmaps.

However, one can’t describe digital transformation in blanket terms. Transformation, simplistically, means moving from one point or state to another over a period of time. Around the world, and specifically in South Africa, not everyone is starting their transformation from the same point, and beyond that, not everyone is on the same journey.

Some newer financial services businesses such as TymeBank, Bank Zero and Pineapple don’t depend on generations of legacy systems. On the other hand, some very big financial businesses in this country have spent billions of rands on serious legacy systems dependent on mainframes.

They’ve done transformational work to keep up with the digital age, but in truth, it’s just on the front end. If you dig just beneath the shiny surface with all the bells and whistles, you find something akin to Pandora’s Box where no one really knows what’s going on and if you pull the wrong lever, you can take down an entire bank. Scary thought, but true.

This is because many companies feel that because they have spent huge money on their legacy systems, they just don't want to switch them off. One can’t blame them; this is not a cheap exercise.

Frankly, if something isn’t broken, there’s no need to fix it. Many of these businesses have access to top resources and skills in the shape of in-house talent and the partners they work with, and these partners must be equipped not only in maintaining these businesses but also in helping them do slow migrations.

This is important because even if something is working today, it is vital for C-suites to understand that their competitors are not standing still. They’re pushing along with new investments and bringing new technology on board that will ultimately result in the type of customer experience that modern consumers want.

To put it another way, there comes a time when you can’t keep teaching an old dog new tricks – sometimes you need a pony.

We all know that the traditional banking and insurance sector is probably one of the most conservative in the country. The cost of getting things wrong is by far the most impactful to its customers than most sectors - with the exception of Eskom, of course. Given the cost – both financial and reputational – of getting it wrong, bleeding edge technologies, no matter how revolutionary, should never be adopted before they have had some successes in other markets or sectors.

This being said, even though South African companies have lagged their global counterparts when it comes to technology, the pandemic has definitely set the country on a new trajectory of digital adoption - we see it with the work we are doing and the conversations we are having with our customers.

CIO’s want to differentiate themselves by driving strategies where tech becomes the core business and not just a business enabler. For example, while FNB has been leading the pack from a front-end perspective, Standard Bank’s shift from being just a bank to becoming a digital cloud platform is going to shape the market, and we should start seeing the first fruits from this investment in their earnings over the next few years. This is because the business itself has transformed from a traditional core banking business into a technology business that offers banking.

In the race to leverage technology to get ahead, there are a few battlefields in the South African marketplace, and clear leaders will likely emerge over the next few years.

These are:

The battle of the platforms in the banking space

The banks, led by Standard Bank, FNB and Nedbank are working overtime to become ubiquitous in their customers’ lives. It’s no longer just about making payments or buying vouchers; now it’s about buying and selling houses and cars, among much more. They’re in a race to deliver a far richer, personalised experience to those using their transactional or credit products.

The telcos are moving into financial services

Who can blame them? They have huge customer bases – including the unbanked – and this will definitely be keeping bank C-suites awake at night.

The banks are stretching their lead in the rewards segment

This is largely made possible by the sheer volume of transactions on their systems. There will be many innovations in this space, not least new products and services that gamify traditional Fintech. 

Looking towards other trends that will begin to dominate more discussions:

• Insurance-as-a-service will take off. This is where traditional insurance companies package their business processes into centres of excellence and are able to offer these to new insurance and insurtech businesses.
• The metaverse - like most modern technologies, this will take some time to translate into practical business models for banks and the broader Fintech sector but it’s definitely a space to keep an eye on.
• Hyper automation will enable start-ups to radically disrupt established business models, especially in the insurance-as-a-service space: think onboarding, underwriting, claims processing and pay-outs all being automated with little human intervention.

If you are a CEO or CIO, this will either excite or terrify you. Either way, it’s a bit like watching a giant wave approaching and knowing that you can either run or hide, in which case you will be swept up anyway, or innovate and start preparing now so you can join the tide on your own terms.

Much of the anxiety regarding Fintech and digital transformation is the adoption of an all-or-nothing mindset. You may not need to throw away your entire system – in fact, you probably won’t have to. However, the number one piece of advice for C-suites today is to clear the table and start designing your conceptual destination from scratch, exactly where you envisage your business. Once you have this, and it is clear, then methodically solve backwards to where your environment currently sits.

This is imperative because the alternative will likely result in you becoming an also-ran. The market is full of examples of big brands, worth billions, launching Fintech products with so many bugs and problems that they don’t do anything near what was promised. We live in an age of savvy consumers – it is far better launching something that works, and delivers what’s promised, than being first to market.

You’ll know all too well: there’s no person quite as unforgiving as a banking or insurance customer.