PwC calls for financial transformation
JOHANNESBURG - Financial services firm PwC has called on the industry to transform or risk a more fragmented sector in the future because of the slow pace of change.
PwC South African partner responsible for financial services Jorge Camarate said the country’s big four banks were yet to transform significantly.
“The growth of unexpected players emerging in the financial services industry has created what has been called a ‘marketplace without boundaries’,” he said, adding that non-traditional players were increasingly exploring new opportunities, enabling them to challenge incumbents and continually change the state of financial services in South Africa.
Camarate said Capitec, which boasts a market capitalisation of R113.6 billion, had demonstrated that any company could compete and challenge the dominance of the universal banks, saying: “Capitec has been successful in entering the retail banking sector.”
Camarate also noted that South Africa was digitising its banking sector very quickly. He stressed, however, that going digital should not be a separate model, but a way of how banks could serve their customers in a “more cost-effective manner”.
PwC identified three trends developing the market that could impact the banking landscape and profitability of the big four banks.
These included the emergence of digital solutions with lower-cost models launched by adjacent financial services players; the emergence of sector and industry-specific banks, closely integrated with broader supply chains, launched by non-financial services players; and the ongoing transformation of the big four banks to address changing customer, regulatory and technology needs.
The lack of transformation in the banking sector has been a bone of contention in South Africa politics.
Earlier this year, President Jacob Zuma called for diversification and transformation of the sector and for new players to enter the market as part of the much-touted radical economic transformation.
Zuma made the remarks after the Competition Commission released its report on collusion by 17 banks including Absa, Investec, Standard Bank and Barclays in manipulating the trading of foreign currency involving the volatile Rand.
Just recently, a group of black professionals said they were on course to establish a cooperative financial institution, which would be a precursor towards Khanya Cooperative Bank, in a bid to transform the country’s banking sector.
Last month, Discovery moved a step closer to running a fully fledged retail bank after the Registrar of Banks granted the financial services group a banking licence, just weeks after TymeDigital by Commonwealth Bank SA said it had been issued with an operating licence by the South African Reserve Bank (Sarb).
This was the first licence issued to a new bank by the SARB since 1999. In July last year, the Sarb granted authorisation to the South African Post Office to establish its own bank. PwC said the big four banks were progressively finding new ways to enable them to stay relevant in the market.
The firm said: “Unlike their challengers, the four universal banks have the principal advantage of being able to serve a sizeable share of South Africa’s business and corporate banking customers.
In order to maintain this advantage, they will need to develop strong data analytics capabilities and develop new solutions to better meet the needs of their customers, as well as find efficiencies in their legacy businesses to fund the large-scale transformation effort required.”