It used to be fashionable to talk about the pace of change. But it’s hard not to be taken aback when I read an update to Accenture’s 2017 Living Banking report.

In 2017/18 the banking industry invested $50 billion in digital transformation. And what did it get for that? The top 100 largest banks by assets grew by 1%. In developed markets, the banks’ cost of equity was 9,8%. Return on equity was 7,3%. It’s no wonder that stock markets are starting to punish banking stocks. The traditional growth strategy relied on locking in loyalty by selling more products. That’s no longer working.

The encouraging news is that the financial services industry is in good shape—and not just fintechs.

While traditional banking and digital laggards lost 1% of their revenue during that revenue, digital-leading banks gained 23%. It’s a shocking statistic, and you can find it in the research I’ve linked to at the end of this blog.

In turn, fintechs — the blanket term for non-banks that are providing innovative financial services — grew their revenue 49%.

The real winner though, is GAFA.

GAFA is a term used to refer to the digital platform businesses Google, Apple, Facebook and Amazon. They reported a combined 57% growth in the three years between 2015 – 18. Apple Pay has entered South Africa with Discovery and Absa. My colleague Justin Bradshaw wrote a blog about that recently.

What is the opportunity? Because there clearly is one.

I wrote in my last blog of the importance of the “zero moment of truth.”

In other words, when the consumer is out and about, or clicking on the web, and has a thought about their finances, there should be an offering unique to that customer.

What should that offer be? Our research suggests that consumers need to trust their banking brands more. South Africa seems counter-cyclical here: we are not seeing the erosion of trust in banking that some consumer research is finding elsewhere.

How do banking brands build trust? Roll out a social media agenda focused on financial education. Every touchpoint, from staff interactions at physical branches to sport sponsorships and everything in between, needs to communicate that the bank is here to look after the consumer’s money. This is what our research suggests. I’ve spoken elsewhere about purpose-driven banking, and so has my colleague Luis Rodriguez.

As I mentioned, South African banks already have a trust advantage. Trusted banks can address their target markets in profitable ways. In my last article, I wrote about how much banks know about us, and therefore how much they can help us.

Building on their knowledge of our behaviour, banks can offer insight-generating personal financial management, and fun things like digitized customer journeys and real-time contextualized analytics. Imagine if your next bank statement told you what kinds of financial decisions people are making who are your age, who live in places similar to you, with a similar marriage status and number of kids. Suddenly, your personal financial planning has a lot more depth and context to it. And this is exactly the kind of insights the fintechs are providing.

This also means holding on to the customer relationship. GAFA and the fintechs are coming at the bank’s customers with valuable, personal offerings. The importance of holding on to the customer relationship and what needs to be done to achieve this will be key strategic decisions for banks in the next three years.

Carmen Whateley

Carmen Whateley

Managing Director – Financial Services, South Africa

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