I saw this article in Businesstech.co.za recently. It’s a pretty high level analysis of a sector; the kind that some media outlets do very well.
So I did my own analysis to see if I could learn something.
First off, if you add up all the customer numbers that are cited, the total is way higher than the banked population. Of course there are multi-banked people, but that is more in the middle and upper markets.
But let’s accept the numbers as published. Standard Bank’s revenue per customer is almost five times that of Capitec. Maybe Standard Bank has higher prices for its Private Banking, or perhaps it has more products, but this discrepancy seems to suggest that customers aren’t buying banking services on price. It also reminds us that some customers are worth a lot more than others – a good reason for the Capitec and Mercantile Bank merger.
Banking has been moving out of the branches since Nedbank started South Africa’s first ATM network. Those ATMs have moved onto people’s phones now. And we can see that ATM penetration, or number of branches, is poorly correlated with number of customers.
Nedbank’s #2 ranking on satisfaction is not reflected in their customer volumes or performance. (Full disclosure: I used to work at Nedbank.) The data seems to suggest that Nedbank could be clearer about who their market is and what they’re offering them.
Have I learned anything? I’m torn. On the one hand, it looks like competition in the banking industry is robust. It looks like no single bank has the silver bullet, probably because what is required is an arsenal of silver bullets and weapons. Or maybe looking at comparisons like this is just pointless, because the devil is in the detail and you cannot infer anything at this level.
Based on our research, I’d say there are some opportunities that banks could seize.
Using AI and data analysis, a bank could track, say, debit orders and find out where else customers are banking — and then offer something better. If lots of customers have home loans or VAF at other institutions, that’s a clear opportunity — if not for switching, at least to understand why.
With the demise of the branch, banks could look at their channel mix. That’s not to say branches should close, but there may be an opportunity to define a strategy to optimize each channel’s usage.
Tied into the channel mix is the number of employees. Some banks seem to have a lot fewer employees per branch. Are there opportunities to aggressively look at cost structures in banks and re-think what can be modernized or automated?
That comes with a caveat. If you want to do more with less, you have to re-imagine and re-engineer your business. You cannot solve tomorrow’s problems with today’s solutions. That’s why so many businesses are moving to the cloud — partly to help with their cost structure, and partly to help banks re-imagine and re-engineer.
The more I look at the data, the more I’m reminded that businesses have a purpose. And they attract people who believe in the same purpose. That’s why no single bank will change this picture. It’s pointless offering home loans to lure customers away from competitors if your home loans are carbon copies of the ones the customers currently have.
If a bank wants to increase its market share, it needs to focus on what it will take to get people to switch. A great option (which Accenture has researched) is to look at the values and purpose, and create value for the market which the bank wants to address. Research suggests if banks do that, they could improve revenues by up to 9%. Competing on scale and price isn’t enough any more.
For more about Accenture’s research on Purpose-Driven Banking, please click here.