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The future of banking will be technology-led, but it remains unclear whether new players will be able to compete with traditional banking institutions in terms of scale and profitability, Nedbank [JSE:NED] chief executive officer Mike Brown said on Wednesday.
Speaking to Fin24 on the 50th anniversary of Nedbank's listing on the Johannesburg Stock Exchange, Brown was adamant that traditional banking institutions were up to meeting fintech challengers head-on, pointing to Nedbank's introduction of seamless online client on-boarding in a bid to improve efficiency.
He said the bank had, in recent years, invested approximately R2bn a year in new technologies in the interests of being more competitive in a new era of banking.
'Incredibly exciting'
"By the end of 2020 we out going to have digitised our top 10 products using the on boarding system as a foundation... it’s an incredibly exciting time," said Brown.
With a market cap of R126bn, Nedbank has a presence in six southern African countries, as well as a footprint in west and central Africa, through a 21% shareholding in Ecobank Transnational Incorporated.
New players such as TymeBank, majority owned by billionaire Patrice Motsepe's empowerment investment holding company African Rainbow Capital; and Bank Zero, co-founded by former FNB CEO Michael Jordaan, have been seen as pegged as potential banking disruptors.
But Brown still believes in the firm foothold of established players. "What is going to be very interesting over time is how much, if any of the newcomers are going to obtain scale and profitability."
Growing the economy
Like other sectors, the banking industry is not immune to the prevailing challenges facing the economy, which include poor GDP growth and high unemployment.
Brown stressed that banks reflect the environment they operate in, saying the country can ill afford to continue on its current trajectory. South Africa’s GDP in the first quarter of 2019 contracted by an annualised 3.2%, the largest quarter-on-quarter drop in a decade.
Brown welcomed the newly unveiled economic strategy blueprint released by the National Treasury, saying his initially assessment was that it would stand a solid chance of succeeding if well implemented.
Released on Tuesday, it is the latest in a series of interventions aimed at jump starting sluggish economic growth.
"If rightly implemented… it has by far the best chance of improving growth, GDP, unemployment and fiscal sustainability than any economic policies that I have seen for South Africa," said Brown.
According to Brown, the key factors hampering SA's economic growth are the debt-to-GDP ratio, high unemployment and an unsustainable fiscal deficit.
He stressed that policy certainly was crucial to achieving high levels of growth and driving investor confidence.
