Three Rs changing the financial services industry

Kerin Wood Partner, PwC South Africa November 20, 2018

Estimated reading time: 4 minutes

New regulation, rising consumer expectations and new technology are changing the world for the financial services sector. Risk holds the key.

The winds of change are buffeting the South African financial services sector from all sides. Consumer trust is at a low ebb. There are new regulations springing up all over the place. Most worryingly, customers and the best people now have other options.

Woman sitting at the table working on her cellphone

But all is not lost. The first step industry leaders can take to weather the storm, and put themselves on the front foot, is to put Risk on top of their agenda. Because once financial service providers understand Risk, with a capital R, and the need to take a truly holistic view of how it affects their business, it makes all the other R-words a lot easier to deal with: Reinvention. Regulation. Retention. All these underpin the main aim of business, with another powerful R-word being the need to remain Relevant.


The Regulatory tsunami is upon us

Let’s start with Regulation. There’s little doubt that increased regulatory oversight is now the new normal, and we’re increasingly seeing regulators stepping in to force compliance. Under the Twin Peaks model, we’ve just seen the Financial Sector Conduct Authority (FSCA) launched, and until the Conduct of Financial Institution (COFI) Act is promulgated, the key legislation that holds sway is the Financial Sector Regulation (FSR) Act.

It’s an alphabet soup of legislation – but the important takeout is the duty it imposes on the financial services industry to treat customers fairly. Financial services providers can’t just tick a compliance box: the Treating Customers Fairly (TCF) principles that are embedded into COFI mean they have to actually be able to demonstrate delivery of fair outcomes for their customers.

What does this mean? The key here is that risk and compliance needs to become baked into your strategy, and be a core part of every provider’s innovation and go-to-market process. It’s not just about building compliant customer solutions. It’s about taking a company-wide view of your approach to customers, products, and how you serve clients. It impacts every department and every person in your business, from HR to technology. This is echoed in our recently launched Insurance survey where we talk about what is needed to take insurers into the future. 

Reinvent yourself. Or die.

This end-to-end risk conversation is vital to future-proofing today’s financial services organisations. It doesn’t matter how much you spend on marketing, or how slick your app is, if you don’t change, you will not survive.

Reinvention starts with taking a clear-eyed view of conduct risk in your business, with the ultimate aim of rebuilding trust within an increasingly cynical market of new customers. It means more than driving correct ethical behaviours internally. It affects how you hire people, and how you remunerate your sales force: are they paid to sell volumes, or are they paid to sell the right product at the right time?

It affects your legacy products and systems. Are your products aligned with the market? Are you able to provide your customers with the convenient and seamless experiences they demand – and that new market entrants will offer? To do this, you will probably need to redesign and rework your products, processes and workflows across the business.

It’s a daunting task. But it’s a small price to pay for remaining relevant.

Retention. It’s a real thing.

Indeed, retention is another R-word keeping financial services CEOs awake at night. Remember, in a market where global consumer trust in financial services organisations is lower than in any other industry, customers can switch more easily, than ever, between providers.

To keep them, financial services providers are going to have to dramatically improve the consumer experience, and personalise their offerings as much as possible. PwC’s analysis of South Africa’s major banks shows clearly how the competitive environment, and the continued transition of customers to digital channels, has become increasingly visible.

But retention goes both ways. If financial services companies want to rebuild trust, they need to start from within – and keeping their best people is a vital part of this process.

This means establishing a clear culture of integrity within an organisation, and living it, from the top down. It means looking beyond profit to give your people a wider purpose, and showing them, and the customers, that you play a more meaningful role in society.

Companies that place an equal focus on their bottom line, their people, their customers and their community will be the companies that thrive. And it all starts with the way you see Risk.


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Kerin Wood

Kerin Wood

Partner, PwC South Africa

Tel: +27 (0) 11 797 5246