In SA’s increasingly tech-savvy climate, what challenges are neo-banks going to face?

Mar 3, 2019 | Monitoring Solutions

There might be a determined need for low-fee, zero-fuss banking in South Africa right now, but to take on the big guns, neo-banks need to earn consumer trust by ensuring a top-notch customer experience.

It’s no secret that neo-banks (fully digital banks without a traditional branch network) are threatening to change the way we bank. With lower expenses due to less infrastructure and employees, these game-changers can afford to offer vastly reduced fees, higher interest rates and cheaper credit. Considering the now defunct 20Twenty, South Africans are known to be skeptical, but with improvements in technology and the continued upsurgence of the mobile technology revolution, confidence in technology is increasing and being embraced more readily. The bulk of purchasing power nowadays resides with digital natives, who are smart and ambitious, armed with low cost smartphones and who have increasingly complex demands for inclusive financial products.

Three big players have launched (or are in the process of launching) in South Africa this year already. Will this be the downfall of traditional brick and mortar banking as we know it?

The three neo-banks launching in SA in 2019

TymeBank, South Africa’s first fully licensed digital bank, has recently gone live in 500 Pick ‘n Pay and Boxer stores, where customers can open a bank account in under five minutes. Bank Zero is an app-driven bank with a focus on providing solutions to real banking problems to both individuals and business. The number zero plays an important role in their marketing, so we’re guessing zero bank fees? Time will tell when they officially launch in the next few months.

Discovery Bank, an extension of the insurance group, is the world’s first behavioural bank. Currently in beta testing, the model is similar to that of Discovery’s Vitality Rewards programme, ie. you get rewards for making good financial decisions. Years of rich data will likely enable powerful AI to be utilised in bringing services to market.

The customer experience is key

All three promise highly secure technology, and TymeBank and Discovery make use of real-time biometric recognition to eliminate the need for paperwork. Naturally, data is critical in their success; TymeBank will be utilising Pick ‘n Pay’s Smart Shopper database and Discovery will be tapping into its 2 million health insurance clients. However, with great data comes great responsibility.

Data-driven and AI enabled product offerings bring benefits to tech-savvy consumers, but confidence and trust will be needed to win them over, and this is built up over time. Without the ability to march into a branch and speak to a human being to express one’s dissatisfaction, and being able to switch banks with the press of a button, customer retention is more dependant than ever on customer satisfaction. Neo-banks will have to ensure a consistently good digital experience to its customers, and monitoring the user experience over digital channels is a critical part thereof.

Digital transformation has become a strategic driver for traditional banks, and by its very nature also for neo-banks. Delivering services digitally introduces many dependencies on elements outside of the control of the banks, for example mobile networks, ISPs, B2B integrations and cloud services that all form part of the mobile financial services ecosystem which involves layered services from many institutions. One way to mitigate against this debilitating absence of control is to gain visibility into the customer’s full digital experience, meaning all the elements that work together to enable the service, end to end. This visibility is gained through digital experience monitoring – the practice of continuously testing transactions on the system from the end user’s perspective, and then visualising the performance of each step of the transaction, as well as raising alerts if any responses do not conform to defined criteria.

Given the many available channels over which modern digital services are delivered, mobile apps, web and HTTP APIs, legacy-but-pervasive technologies like USSD and SMS, it is critically important that this monitoring supports all available digital channels.

Breakpoint anticipated the importance of monitoring the end-user experience for mobile wallet transactions at Mobile Network Operators and other providers of mobile financial services, long before the term “digital transformation” became commonplace. This resulted in the development of Apogee, Breakpoint’s digital experience monitoring solution  which has been used to monitor these services for the past 5 years, providing real-time insights, data analytics and real service checking of the customer experience, as well as detecting and identifying the root cause of a problem, often before customers even become aware of it.

The launch of neo-banks in South Africa signals a new dawn for an alternative technology driven banking landscape, and with Breakpoint’s Apogee providing continuous digital experience monitoring, they can ensure that the customer’s experience of their services are indeed delivered as intended, in order to earn the customer’s trust – a vital element for the survival of neo-banks in South Africa’s mature financial services landscape.