Africa’s banking industry focusses on client centricity in the wake of technological advances and new entrants

The banking landscape keeps changing as the industry faces new opportunities and threats. The emergence of Fintech entrants and the risk of cyberattacks add to pre-existing challenges caused by slow global economic growth, high political risk and complex regulatory requirements, according to a survey issued by PwC today.

Johannes Grosskopf, Financial Services Leader for PwC Africa, says: “Our survey aims to highlight opportunities and challenges facing banks from the perspective of bank CEOs as they position their banks to succeed in the future. The results of our 14th edition of the ‘African Banking survey, 2016’ show that CEOs are committed to developing new strategies and reinventing their organisations to meet the demands of an ever-changing banking industry”.

Grosskopf comments: “The African banking industry is dynamic and has evolved substantially since our last survey in 2013, as banking CEOs have adapted their strategies to meet the demands of an ever-changing banking industry. The number one focus for CEOs is the client – how to attract new customers and retain their existing clients in a customer centric eco-system.”

Driving forces

Breakthroughs in technology are radically transforming the business and social landscape, and the way in which we live and work. Emerging technology is reshaping the social landscape into a more mobile and customer-centric world where consumers are redefining their expectations in terms of engagement and price ratio. 47% of the global population will be digital natives by 2020, and these populations will have access to 20 times more information in 2020 than today.

Demographic change will play an important role in the development of the African continent. The UN predicts that Africa will be the second most populated region by 2050 with two billion inhabitants, after Asia with five billion.

Both these factors were highlighted as significant forces that will continue to shape the banking landscape in future.

Most pressing issues

When aggregating the answers of all the CEOs interviewed, the most pressing issue is regulatory compliance (prudential and conduct). However, we note that for domestic South African banks, the risk of a sovereign downgrade is their primary major concern, as it has direct and indirect impacts on their access to liquidity and cost of funding as well as on customer and business confidence.

For foreign banks operating in South Africa, regulation and currency risk are at the top of their list of priorities as the latter may limit their access to liquidity from their home markets. Kenyan and Nigerian banks are most concerned about capital management as regulators in their domestic markets are looking to adopt more stringent regulations, such as Basel II/III, which could severely impact their balance sheets and profitability.

Banking CEOs are also increasingly worried about cybersecurity, and more generally IT resilience. “Cyberattacks and the associated theft of consumer data is a major cause for concern given its growing prevalence throughout the banking industry,” Grosskopf adds.

Disruption from technology

New technological developments are real game-changers for the banking industry, in particular Fintech start-ups. As new entrants bring more innovative and cost-effective solutions, South African banks consider them a significant threat to their business.

But traditional banks won’t be leaving the playing field any time soon - their trusted brands and existing customer bases are significant advantages that they can leverage to remain relevant. The PwC Fintech survey indicates that 46% of global banks CEOs are engaging or considering to engage with start-ups through partnerships.

Even though Fintech remains a small market in Africa, investments are expected to rise significantly from $200 million in 2014 to $3bn by 2020. Respondents indicated that operational constraints are considered the main obstacle to innovation within banks. This is mainly due to legacy infrastructure.


It is apparent that focus on the customer is of paramount importance to the banking executives and that customer centricity is no longer just a buzz word. The objective is to move away from product silos, create cross-selling opportunities and enhance the client experience. Banks are looking at technology, better use of data across the organization and partnerships with Fintech companies to create eco-systems which maximise the customer experience. This approach will also impact the use of branches in the future where the majority of respondents predict a reduction in branches in the medium term.

Searching for growth

The appetite for international expansion seems to have reduced since the previous survey due to uncertainty in global markets. Banks are now placing their strategic focus on domestic expansion based on diversification across all areas of financial services, looking for additional profit pools from existing clients.

Developing their African operations remain important with Nigeria, Kenya and Ghana viewed as growth markets.


Large, full-scale South African banks achieve ROEs in the 18%-20% range in their retail and CIB businesses; and they expect those to remain in the same range in the coming years.

In the long run, our survey respondents target cost-to-income (CI) ratios in the 45 - 50% range. Sustainably low CI ratios are attainable through the digital integration of dynamic cost control tools across the organisation, as shown by the example of Australian banks.


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Sanchia Temkin
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