There’s a meme that did the rounds on social media at the beginning of the Covid-19 pandemic. It showed a mock survey that asked “Who led the digital transformation of your company. Is it a) the CEO b) the CTO c) Covid-19?” The third answer is circled…
With a quarter of the world in strict lockdown and either working or confined at home, the internet has been people’s window to the world. Home schooling, e-commerce, tele-medicine, streaming, digital subscriptions have all seen a massive uptake. Companies and organisations are experimenting new ideas at a scale and speed that were unimaginable only a few months back. The pandemic in many cases has also exposed those who have delayed their digital transition.
The banking sector has been cognisant of the tech revolution for a while now. Fintech has been knocking at its door for many years and, from digital banking to high frequency trading, technology has been at the forefront of the transformation of banking, enabling banks to reduce costs and to gain an edge over their competitors. So how are they faring?
Jouk Pleiter started his company 15 years ago. As a digital entrepreneur, he’s been building tech companies all his life. He saw that banks were struggling with their digital transformation, where solutions appeared clunky and different operations of the banks operated in a disjointed way. As a result he developed solutions for banks to help digitise their processes. Today the company has 1,000 employees, of which 50% are focused exclusively on product development – effectively R&D.
Having seen the industry evolve he believes that digital transformation is as relevant today as it’s ever been. There are two key elements of a successful digital strategy, he explains. First, transformation needs to be seen as a journey rather than a project. And that journey is continuous. The second is that it needs full buy-in from senior management.
“Top management needs to be completely convinced and committed to digital transformation. My biggest recommendation typically to executives is to stay as close as possible to the actual development teams on the ground and to have an active dialogue, to help guide them and align on strategic priorities. The idea is that these teams can operate independently and autonomously but that they also need to get strategic business input.”
Banks, he argues, need to start thinking like the big digital disruptors, the Googles, Ubers and Netflix of these worlds that have managed to “seamlessly orchestrate customer interactions”. This mindset change is critical to be able to move from legacy systems to a new way of interacting with your end user, he says.
Banks have over the years grown to operate in silos, he says, adding different services and solutions in a patch-like way. They started with branches and ATMs; then added call centres; then internet banking; now mobile banking. But what he saw when he launched his company 15 years ago was that each customer interaction channel operated separately. They were not one seamless interconnected structure.
The biggest disruption to finance in the past decade on the continent has been the rise of mobile payments. Nearly 50% of all global mobile payments take place in Africa. Because of Covid-19, we have seen governments using this technology to disburse social payment schemes including to workers from the informal sector.
Pleiter agrees that mobile is the future for the continent. And that the challenge for banks is to ensure that there is no friction in terms of the user experience. A lot of banks are still far away from that seamless integrated customer experience. In terms of mobile wallets he sees it as a great way to move away from a cash-based society and to raise the level of financial inclusion. The next step will be to merge these wallets within the more traditional banking services, and there lies the opportunity.
But he is keen to stress that success will be based on the ability of banks to provide a frictionless experience, and that means having a platform that is omnichannel, so that the user through one platform can access different products but also receive the customer or human-assisted support he may require. As a result he says that it is “impossible just to streamline and orchestrate these customer-facing interactions if you do not have the capability also to include employees as part of the process.” In other words you need to think about the internal systems and “screens” at the same time as the external user experience.
Backbase’s client base is truly global, working with banks in developed markets such as Europe, Canada, Japan, New Zealand and the US and fast-growth emerging markets such as Kenya. Traditionally they have worked with medium-sized to large banks. A lot of banks cannot afford to build massive R&D teams themselves and this is where they come in, providing off-the-shelf cloud-based solutions and working with the banks to implement these.
The company offers a full suite of digital banking services providing a seamless customer experience across all channels. Backbase acts as a digital hub that unifies data and functionality so a bank can plug and play by connecting existing solutions from Backbase and fintech players with their traditional core system.
He doesn’t see bandwidth or low internet penetration as a concern and is actually impressed by what he sees on the continent. Costs are going down, he says, both in terms of data and devices. On a recent trip to Kenya, South Africa and Nigeria he noted that digital transformation was at the top of CEOs’ and senior executives’ priorities. From his experience in other emerging markets, he feels that they can leapfrog Western markets, which are held back somewhat by their systems and current structures. Cloud-based solutions, like pay-as-you-go, allow you to skip that whole IT investment cycle.
They’re working with several banks on the continent. So how does Africa fare in terms of innovations, compared to more advanced economies and other emerging markets? On the plus side, Pleiter thinks the regulatory environment is pretty flexible and is not an obstacle to innovation. One possible constraint is the lack of engineers, or digital talent as he calls it, even if he acknowledges it’s a universal problem. To overcome this, they are currently developing a digital coding school in Kenya and what he calls nearshore development centres where people are certified with IOS Android and Java development to ensure they have the digital development capacity available for their clients in the African continent.
He is convinced that the market is ready for digital innovations but if they’re to survive the new players in the market, as we’re seeing with the rise of fintechs, they will have to show a true commitment to go digital. They need to have a Silicon Valley like culture of continuous innovation and own the journey to innovate for their own customers, he explains.
So what are the next steps?
“Backbase will give you a lot of accelerators which you can adopt and you can go to market with very fast. But the beauty is that it also gives you a lot of flexibility at the same time to innovate on your own and to build your own unique custom features.”
Banks will survive disruptors and have the foundations to really grow their markets, he says. All they need is the will to embark on the journey.