PwC has backed South Africa's big four banks to stand their ground against a slew of new digital banks expected to increase competition in an industry last rocked by the entry of Capitec in 2001. Photo: IOL

JOHANNESBURG – A study by accountancy firm PricewaterhouseCoopers (PwC) has backed South Africa's big four banks to stand their ground against a slew of new digital banks expected to increase competition in an industry last rocked by the entry of Capitec in 2001.

The firm said yesterday that Nedbank, Absa, Standard Bank and First National Bank (FNB) would rise to the challenge posed by new entrants by learning and employing the same tactics that have made global digital banks a real threat to their traditional counterparts.

Chantal Maritiz, a partner in PwC’s financial services division, said unlike their challengers, the four universal banks had the advantage of being able to serve a sizeable share of South Africa’s retail and corporate banking customers.

“We believe that the four universal banks can, and will, rise to the challenge posed by new digital entrants, by learning and employing the same tactics that have made digital banks a real threat to their traditional counterparts,” Maritiz said. “Not all banks will succeed in this new environment, but those quickest to adapt will benefit and capture a disproportionate share of the future banking market.”

The Patrice Motsepe-backed TymeBank has recently soft-launched with limited services, the growth of branchless. 

The country is still awaiting other digital offerings in the form of Discovery Bank, Bank Zero and African Bank’s "My World" transactional offering.

The public launches of the new tech-savvy entrants were expected in the last quarter of 2018 to early 2019.

However, PwC said the new entrants would struggle to compete with the financial muscle of the established big four banks.

“For instance, each of the universal banks in South Africa typically spends more than R1 billion every year on marketing alone. New entrants with limited budgets, already stretched to meet technology development costs, cannot afford to compete head-on,” Maritiz said.

The entry of digital-only banks has seen the big banks spending billions on their digital channels over the past few years.

FNB earlier this year redesigned its branches to balance the use of technology with a personalised service, while Nedbank last year launched a digital-only branch in Johannesburg.

Nedbank also said it had deployed 33 software robots to improve process efficiencies in the year ended December 2017 and that this would reach 200 by the end of this year.

The South African retail banking sector is characterised by high barriers to entry. The sector is concentrated, with four of the largest banks – Standard Bank, Absa, FNB and Nedbank – accounting for more than 80 percent of retail deposits.

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