Have you ever been to a bli (a typical South African barbecue) where everyone has to have food? Usually people prepare what they think will appeal to everyone. What this usually happens is a familiar favorite selection, with no one making any bold moves. That is until “friends of friends” add a crazy twist to the potato salad. It quickly became everything everyone could talk about, and although there was already a potato salad on the table, this solid favorite remains untouched. People are drawn to bold new products.
Not long ago, South Africa's financial news was dominated by an announcement that Revolut, Europe's largest digital bank, is focusing on South Africa as an expansion market. Since this spicy news was removed, there has been considerable concern that all traditional South African banks are currently under threat.
I have a different opinion. There were similar emotions when Tyme and Bank Zero began, and while they were doing well, they weren't defeating the “Big 5” – Standard Bank, First Land, Absa, Ned Bank, and Capitec.
I have been working with executives at large traditional South African banks for nearly 20 years, and most of the time they are always finding ways to coexist with new market participants.
In my opinion, the possibility of Revolut's launch in South Africa is not a culinary explosion, but a subtle change in the bank menu. But it prompts an important question: who is poised to adapt, who is left in the old ones? It's not about industry-wide reforms, but about targeted improvements in digital experiences.
The focus here is on digitally inclipped customers. This is a segment that is increasingly prioritizing seamless, global financial access. Institutions that have built their reputation for premium digital services like Discovery Bank may face increasing competition.
South Africa's digital banking landscape has ripened over the past decade. Data from Statista shows that the volume of mobile app transactions has increased significantly over the past decade and continues to grow, reflecting the shift towards digital banking of some segments of the banking population, including digitally savvy, wealthy, and largely available consumers. So, if you want to stop your bank from flipping the eye of those customers, what should you do?
How South African banks should respond?
Accenture's 2024 South African Bank Consumer Survey found that the main bank of consumers owns 73% of bank revenue, making it the second largest in Spain in the world. This indicates that South Africans are more loyal to major banks than Europeans and Americans, so banks need to prioritize strategies to deepen customer loyalty and increase wallet share. Here's how:
– Adapt referral programs to reward deeper engagement with existing customers, not just new customers.
– Leverage data and AI to provide personalized financial tools within your existing apps. This includes targeted savings goals, investment recommendations based on spending patterns, or customized budgeting tools. Banks become more sticky by becoming an important part of their clients' financial lives.
– Use Agent AI to actively identify and address potential customer issues at scale, blending digital and human touches (what purely digital banks struggle with).
– Fast Payment Program (RPP), or Payshap, introduces new ingredients to this mix. Will Revolut put the paishap at the heart of their offerings or will they treat it as a post-bolt-on idea to meet regulations? South African banks need to incorporate RPP into as many digital products as possible.
Let's be real: The potential arrival of Revolut is not Braai's main course. Banks who want to attract wealthy, digitally savvy customers who are likely to form the backbone of next-generation wealth can't stand the same old recipes.
They need to play Revolut in their own (digital and AI) games, while maintaining local flavours that European imports cannot replicate. The question is, do you offer the same old bland side dishes, or create a culinary masterpiece that will come back for more?
