The technological landscape has changed dramatically over the decades. Financial institutions are closely linked to the industrial revolutions of the past, being both the donors and the direct and indirect beneficiaries of more efficient systems. Emerging technologies have given way to various applications and inter-industry collaborations that previously seemed inaccessible. As a result, business models have changed dramatically, paving the way for world-class innovation and creating new opportunities for income generation.
In recent years, the proliferation of automated teller machines (ATMs) has been exemplary of the innovation process. ATMs were previously used exclusively for cash withdrawals. With increments of innovation, ATMs were quickly able to process cash deposits, produce bank statements, reduce queues inside the bank, and reduce reliance on human ATMs to mundane tasks. With the deposit of cash at ATMs, the banks’ discount on the total value of cash ordered in cash is recycled through the deposit and withdrawal mechanism.
Technology has also improved the banking service and experience, with more convenient online banking services allowing banks to focus more on improving service delivery than just delivering services. For example, previously, to use an ATM or a banking service, you had to have a bank card; with innovations such as MTN MobileMoney, eWallet and Send Imali, anyone can send and receive money without a bank card. Having a mobile number is enough.
Admittedly, the number of unbanked people is still high at around 23.5% in South Africa, and mobile phone penetration far outweighs (at 90% current, although this figure should not be read at face value).
Somewhere else, we have written on how the banking sector seems to be characterized by cutting edge innovation on the one hand (especially cybersecurity), but is still characterized by vulnerability on the other hand (as evidenced by theft of funds in transit as well as the lack of a clear position on cryptocurrency).
Africa found itself at the dawn of another exciting, rapid and barely understood revolution. According to the World Economic Forum, the Fourth Industrial Revolution (4IR) is fundamentally changing the way all human beings live. Under President Cyril Ramaphosa, the government has said the 4IR will be designed to take a giant leap forward and position South Africa to become a more equitable society. In a country known to be among the most unequal in the world, a more equitable South Africa is a goal for the next decade that can only be achieved if sectors such as banking are seen and seen as catalysts for development..
The Big Four Banks in South Africa (Standard Bank, Absa, FirstRand and Nedbank) have all taken steps that point to a pivot towards 4IR technologies (indeed, it was Standard Bank in 2018 that alerted the country to the possibility of mass automation).
Superimposing these advanced technologies on existing structural inequalities (or focusing exclusively on their use to reduce personnel costs) amplifies the same inequalities. On this point, the banking sector as a stakeholder has a unique reason to become more involved in the telecommunications sector, in particular by investing in the country’s information and communication technology (ICT) infrastructure, as well as by investing in Internet penetration (67.48% in 2021) in order to make Internet connectivity more reliable.
It was encouraging to see banking groups invest in and increasingly sophisticated IT divisions, and this can be done in a more scalable setting operating mode which combines the recruitment and training of its internal staff, whose current positions will be made redundant in the next ten or twenty years.
Of course, other actors must do their part; spectrum allocation, currently blocked by disputes between mobile network providers, will also increase data accessibility.
A Study 2021 found that 1 GB of data in South Africa cost $ 2.67 compared to $ 0.05 in Israel. A possible contributor to the high cost in South Africa is probably the cost of installing ICT infrastructure. A multifaceted approach to making data as well as smartphones cheap will attract more South Africans into the online banking ecosystem, which in the long run bodes well for the country’s technological development.
Although South Africa’s smartphone penetration is among the highest on the continent and even the world at large, the country’s inequality (and the urban-rural divide) means that some users tend to own multiple smartphones, making of 90% penetration an inequitable distribution. Saturation of smartphones on a fair basis will further allow citizens to use more advanced applications for online banking – a benefit for South African banks on their way to becoming the model for online banking.
A widely held view is that 4IR involves two forms of integration; one horizontal and the other vertical. The first refers to the integration into all of the value creation network systems while the second refers to the integration of different network manufacturing systems as well as the end-to-end engineering that can take place throughout the product lifecycle.
Today, many bank customers are young and middle-aged people who have segmented expectations and preferences that are different from those of the previous generation. Meeting all these expectations with a single approach is no longer as plausible with existing banking models, and will only become possible with the use of fourth generation tools, mechanisms and technologies. As a result, banks will need to be set up to provide an integrated system that will improve mobile banking services by offering solutions to help facilitate the automation of banking processes.
Classifying the evolution of banking over the past decades, the internet has helped Banking 1.0 to become what can be described as Banking 2.0, and with the rapid increase in smartphone penetration, Banking 3.0 has become a reality. Today, the third generation bank is moving towards Banking 4.0, not because of new inventions, but because of the maturity and growth of new technologies such as artificial intelligence and virtual reality systems and recognition. voice, which together constitute a particularly powerful set of factors. for better and fairer banking services. DM
Nomzamo Gondwe, Johannes Sekgololo and Bhaso Ndzendze are researchers at the 4IR and Digital Policy Research Unit (4DPRU) at the University of Johannesburg.