The Independent Uganda: You get the Truth we Pay the Price
Banks must embrace the new normal characterized by the iniquitousness of technology
| JAMES KARAMA | Covid-19 can be categorized as a black swan event—-a rare, unexpected, unpredicted, and undirected event that caused major disruptions.
The efficiency with which the virus spreads, its exponential nature, and lethal attributes, have turned our response into a fight for the survival of the entire human race.
Unfortunately, the easiest and most common approaches to stemming the rapid spread of the virus have been lockdowns, quarantines, and other restrictions to the movement of people. These lockdowns have brought to the fore the twin challenges of safeguarding both lives and livelihoods and highlighted the challenges of having to deliver both.
These restrictions to the movement of people make it difficult for bank clients to travel to their branches and ATMs. The situation is further exacerbated by the fact that currency notes are considered a means through which the virus can spread from person to person.
The immobility caused by lockdowns forced consumers to adopt digital channels for collections, savings, and payments. Data tracked by Bank of Uganda, shows that consumers rapidly increased the use of mobile financial services, pivoting away from cash.
The data indicates that 925.27mn transactions were carried out in the third quarter of 2020, up from 720.85mn in the third quarter of 2019. Other digital channels like internet banking also followed a similar trend.
Jeremy Kingsley the Senior Editor at the Economic Intelligence Unit noted that lockdowns have accelerated the shift to digital channels. In the EIU’s global banking survey conducted in early 2021, 65% of banking executives (up from 59% in 2020 and 35% in 2018) agreed that the branch-based banking model will be “dead” in five years.
Tony Prestige former Deputy Chief Executive at Santander told the BBC that the pandemic has “concertinaed’ five to ten years of change into a year.
On a positive note, the move to digital channels has opened up limitless possibilities. Now any player that can offer a seamless digital experience across different marketplaces, can provide financial services. Furthermore, the future of digital financial services is buoyed by tech savvy millennials who want everything to be provided at a click of a button. This shift has boosted the growth of financial technology companies and digital ecosystems.
Now the question on every financial services executive’s mind, is how do I capture and hold a beachhead in this new digital frontier? Especially what will the future look like? I cannot claim to have a crystal ball. But I believe that two factors, will shape the future of financial services.
The first one is owning the customer, mostly by being able to exceed customer expectations in a digital world. The only way to give customers an exceptional experience will be to connect them into a digital web, bringing together the buyers, sellers, producers, and intermediaries/distributors. A good example of this phenomenon is the WeChat ecosystem in China. WeChat leveraged social networks to become a lifestyle platform. WeChat users can buy movie tickets, call a cab, order food, play games, check in for flights, move money around, book doctor’s appointments, pay for utilities, read, or watch the news, make new friends, donate money to various causes, in addition to texting, voice and video calling. The winners in this new digital world must own entire client ecosystems.
Banks must embrace the new normal characterized by the iniquitousness of technology. Technological know-how is no longer the preserve of the large, specialized IT departments that banks are famous for. The technologies that manage financial transactions can now be marshalled by non-bank operators.
The above has led to what I will refer to as extreme innovation. Which in turn has created a growing group of consumers who demand for extreme convenience. Any bank executive, who tries to use their current product/services construct to chart a course into the future will be akin to anyone who thought that they could create more efficient typewriters, when technology and consumer trends shifted towards the computers!
The second factor that will define the new digital future will be data. The digital world has led to the creation of “Big data”, a term coined to refer to extremely large data sets. Usually in structured, semi structured, and unstructured varieties, that are rapidly generated and transmitted from a wide variety of sources.
While such data is all over the place, the real differentiator will be an organization’s ability to analyze these datasets and tease out patterns, trends, and associations. In order to deliver better customer experiences, be more efficient and target clients with the right products at the right time. The availability of data has led to better quality decisions, laser focused interventions and more accurate assessments.
I would like to conclude by observing that Covid 19 has dramatically accelerated digitization. Now most banks are at a fork in the road with one branch pointing towards a future where they must bring clients and marketplaces together into digital ecosystems, harried on by the fact that every corporate with captive consumers wants to foray into the provision of financial services.
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The writer is a senior manager at Stanbic Bank Uganda
