Network International: Finding Smarter Ways to Use Data to Supercharge the Banking Sector

By Salomon Erasmus, Regional Head: Strategic Business Development at Network International

The South African banking sector remains fiercely competitive with challenger banks and niche lenders intensifying the race. When it comes to securing both the lucrative SMME sector as well as a consumer market more willing than ever to switch, finding ways to curate and personalise services will increasingly be the supercharger all competitors are looking for – and data will be the propellant to fuel it.

The challenger/ neo banks and new fintech providers have highlighted the untapped potential of entire segments of the market. Not only have the traditional banks struggled to capture small business accounts, but they are also up against the powerful attraction of simple, admin-light offerings that come with low or no monthly fees.

Insights from internal and external data remains one of the most effective ways to address shifting user behaviour and deliver products that are tailored to what current and future customers actually want.

While legacy banks are dealing with day-to-day technology and regulatory challenges and are, in many instances, still playing catch-up with their digital transformation roadmaps from before the pandemic, the more nimble players have been able to focus on developing services tailored to rapidly shifting customer needs. And yet all financial service providers, both old and new, should be focussed on tapping into the rich information of the data at their disposal, rather than being weighed down by frustrating back-office management.

Lighter vehicles, more powerful engines must be the goal

Our banks are some of the finest in the world, but they do not have universal reach. One way to access, as yet, untapped markets is through external data. Developing great market segmentation and differentiation to get a comprehensive view of the local landscape must be the starting point. If banks want to curate products that are relevant to customers they must include variables that may not form part of the traditional segmentations that banks would normally use. If customers are new, and not yet known to them, banks will have to find ways to leverage external data sets to better understand them.

One of the ways the more nimble challenger banks have differentiated themselves has been through the use of customer data insights to help design and rapidly deploy new products.

Being unencumbered by maintaining legacy systems and supporting a nationwide branch network clearly makes newcomers more agile, with a much lower cost-to-serve, allowing them to quickly launch minimum viable products. This test-and-learn operational culture has been shown in many sectors to be the smartest way to capitalise on the rapidly increasing amount of data, either through new collaborative partnerships or open banking initiatives. But this new way of innovating isn’t necessarily out of reach for the more established banks.

Traditional banking systems have been designed with stability, control and compliance at their core. Banks spend hundreds of millions of rands making sure their systems remain available. However, the pressure will only grow as transactional volume rapidly increases now that the Rapid Payment Programme has gone live.

In an age of digital banking, technology leaders are focused on building cloud-ready, open banking-compliant organisations. This requires constant attention and leaves very few resources open to focus on the growth opportunities big data offers. Banking resources are consumed by day-to-day operations, and we know that finding the right skills to take advantage of new tech that is reliant on data, such as AI, requires scarce skills. The solution lies outside your bank’s walls.

Kicking innovation up a gear, with a little outside help

Many banks, both established and new, stand to benefit from working with outsource partners to help them kick their innovation up a gear. By leaving the day-to-day payments and transaction processing to an outsourced partner, banks are able to free up resources, (skills, time and money) to focus on delivering niched additive products, based on data, to their customers.

What’s more, if banks don’t immediately have the in-house capacity to fully exploit available data sets, they can turn to partners to provide Data Science as a Service (DSaaS). This will help them reap immediate benefits without the financial investment and management time required to do it in-house.

Tapping into Anything as a Service (XaaS), whether it be Payments as a Service or Data Science as a Service, gives organisations an immediate advantage. Suddenly leaders are able to share the burden of functions with a partner whose entire business model depends on finding faster, more efficient ways of doing things. Now, they are able to apply their deep industry experience to designing offerings that are more relevant to their customer and gain an immediate leap on their competitors. If banks are looking for a competitive edge they need the support of a specialist team who understand how to get more out of even the best designed engines.

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