Utilizing Digital Transformation to Build New Business Models

 Every industry is being transformed by digital innovation, and the financial services industry is no different. The possibilities for banks to reimagine customer experiences are endless, thanks to AI-powered self-service transactions, mobile-based financing, and analytics-driven personalization of services. 

Overview of the Changing Landscape

The financial services business has seen a considerable digital shift in recent in the last few
years. A plethora of fintech and non-traditional businesses are entering the banking industry with simple, customer-centric solutions that aren’t confined to the challenges of legacy systems.

Even huge tech firms like GAFAM-BAT (Google, Apple, Facebook, Amazon, Microsoft, Baidu, Alibaba, and Tencent) are leveraging their technological expertise, considerable user base, and big data analytics to provide improved financial services experiences.  While regulators are fostering innovation, they are also attempting to create frameworks that will allow them to monitor these disruptors.

Customers are now exposed to diverse digital solutions from a variety of industry participants. They want their banks to deliver a consistent and intuitive experience across all channels, as they expect the highest value for their money. As a result, current banks confront two major challenges – The first one is to increase efficiency and encourage new innovation-driven operating models that can reduce service costs. The second being supporting legacy systems while adhering to stringent regulatory requirements.

The rapid change in   technology is a top ten concern for business executives globally, according to PwC's 23rd Annual Global CEO Survey. It's a top five threat in banking and financial markets. One explanation for this might be because the time it takes for new technologies to move from concept to widespread adoption is getting shorter. It took a century for 95 percent of American households to embrace landline telephones. Cell phones, on the other hand, did so in less than 25 years.

There is a high level of understanding of the evolving technological landscape within Absa Group. Our digital transformation journey is being accelerated by opening up our legacy systems through microservices / APIs to cooperate with fintechs and start-ups. In fact, building a scalable digital-led firm is one of the fundamental pillars of our new growth strategy. With the Barclays split confirmed, our emphasis over the next 18-24 months will be to identify and implement important strategic digital projects that will help us stay ahead of the competition and improve the customer experience.

Key Areas of Disruption in Africa’s Financial Services Landscape

Fintech in Africa has tremendous potential to make an impact, given that the continent has the second-fastest growing banking market in the world, and is also the global banking industry’s second-most profitable region, according to McKinsey.

The following are some of the important digital or technological developments that we predict will have a significant influence on the financial sector:

Digital Wallets: Payments, Savings and Micro-loans

Digital wallets, often known as mobile wallets, have changed the game in the payments industry. They provide customers with a simple, safe, and rapid way to transact online. According to the GSM Association, over 60% of the adult population in Sub-Saharan Africa have a mobile money account. In fact, the area accounts for an incredible 45.6 percent of global mobile money activity.

In our Kenyan market, Absa has a good wallet service. Timiza is a banking app that allows clients open an account, apply for a loan, build savings products, pay bills, and buy airtime all from their phone. Timiza has amassed millions of customers in less than two years since its introduction. We are optimistic about its possibilities. We'll continue to improve the platform, and the comparable wallet offerings will be available in our other markets soon.

Artificial Intelligence, Machine Learning and the Internet of Things

Fast-emerging technologies including Artificial intelligence (AI), machine learning (ML), and the internet of things (IoT) have the potential to change customer experience by offering tailored services and boost a financial institution’s back-office processes.

Take, for example, chatbots. They can interpret, learn, and engage in conversations like a person thanks to powerful machine learning and natural language processing (NLP), as well as the capacity to analyse organised and unstructured data. Chatbots are increasingly being used by financial organisations to help customers with their queries and to promote banking products and solutions.

In the Mauritius market, we introduced Abby, an AI-powered humanoid prototype, during our rebranding to Absa Bank. This smart banking humanoid is available for self-service banking transactions and queries at branches 24 hours a day, 7 days a week. Abby employs powerful NLP skills to comprehend customer intent and respond appropriately, with support for both voice commands and keyboard inputs.

Once the registration happens, it recognizes customers using facial recognition and allows them to make transactions using a secure PIN that they create during the registration process. Furthermore, it is also capable of autonomous navigation and may physically guide customers to the appropriate branch employees.

We also launched our chatbot on the internet and on WhatsApp in other areas. It's an AI-powered conversational platform that uses human-like, intelligent dialogues to engage and serve customers. We're working on introducing the transactional module of our chat platform, which will make it a more powerful channel for our customers.

Big Data

The emergence of big data may hold the greatest promise for the banking industry. Big data may now be used to create hyper-personalized experiences thanks to technological breakthroughs. This is critical in a society where everyone's likes and preferences are different. With so many alternatives accessible on the market, a one-size-fits-all is becoming obsolete. People have varied musical tastes, watch various movie genres, speak different languages, and have distinct banking and investing demands.

The initial generation of technology lowered transaction processing turnaround time (TAT). However, that has now become a foregone conclusion. Customers will be dissatisfied if a player does not have it. Personalization and customer convenience are at the forefront of the next generation of technology.

Customers are now exposed to global players like Amazon, Netflix, and Uber, which personalize customer experiences using powerful machine intelligence. Customers expect to be provided relevant information that is relevant to them by default, rather than a one-size-fits-all menu.

Absa's Customer360 platform, which uses data analytics and data science models to predict customer behavior and uncover new customer requirements, was recently acknowledged at the Financial Innovation Awards in London. The user is provided with this data in a variety of data visualization formats. Employee adoption and utilization are aided by the platform's interactive elements, such as gamification and "Ask Analytics."

We've prioritized customer innovation in our approach, and we want to not just satisfy but also anticipate customer requirements. As a bank, our award-winning Customer360 Data Analytics technology allows us to better understand our customers' behaviors and needs in to better serve them. We cannot achieve digital transformation without big data.

Blockchain

Another piece of technology that might cut the costs of financial services infrastructure is blockchain, or a decentralized ledger over a peer-to-peer network. This is especially true when it comes to certifying authenticity. In blockchain, everyone on the network confirms the transaction at the same time.

Banks might benefit from blockchain technology in a variety of ways.
It can aid in faster international financial transfers, improve transaction record-keeping, and establish customer identification. The capacity of blockchain to authenticate nearly any type of transaction may be extremely advantageous, especially in an era of cyber-crime and rigorous rules. We are dedicated to developing a blockchain strategy at Absa Group in order to increase efficiency in our operations.

Digital transformation, on the other hand, does not just apply to our online channels, but also to our branches and ATMs. Most of our locations offer a special digital zone where customers may use a self-service kiosk to avoid waiting in line. Wallet banking, virtual teller machines, loyalty networks, agency banking expansion, and a next-generation digital onboarding experience will all help us expand. We believe, ultimately, any company will need to develop customer connections that are omni-channel, service-oriented, subscription-oriented, and, most importantly, data-driven. We'd then have to operationalize that information in order to deliver additional value to our customers.

In a nutshell, it is critical to recognise the new realities that the COVID-19 pandemic has brought to the world. This will compel the financial industry to disrupt digital transformation in a way that the financial ecosystem is protected against the implications of a future global crisis.