In the advent of the fourth industrial revolution, Internet-only/digital-only banks are offering alternative approaches to facilitating online transactions and banking in the absence of physical branches. As a result, traditional, offline banks may possibly experience increased pressure in growing and retaining their customer base.
The objective of this study is to understand the fundamental differences between traditional and digital-only banks’ business models and digital user experience strategies from a consumer services perspective. As a result, in this research, we established to what extent traditional South African banks have embraced service digitalisation and compared this to the services offered by South Africa’s first digital-only bank (launched in early 2019).
By means of convenience sampling, we selected the five biggest traditional banks and the first digital-only bank in South Africa (as recorded at the start of July 2019) and conducted a comparative analysis of the core digital services that were offered to consumers.
Overall, mobile-optimised services were identified as a key digital business strategy, thereby highlighting the importance of a mobile-first approach not only to traditional and digital-only banking services strategies but also to digital business model formulation in general.
While the overall South African banking landscape and banking user experience may be moving towards digital-first and mobile-first, the need for access to banking technology and services 7 days a week necessitate not only mobile-first, but accessible-foremost (i.e. access to infrastructure that facilitates access to online banking technologies, both remotely and on premise) banking business models.
With the growth and increased adoption of the Internet and online technologies over the past few decades, many opportunities for business digitalisation and new digital business model formulation have arisen (Louw & Nieuwenhuizen
Banking consumer services (i.e. services that are delivered to consumers through digital channels such as websites, Internet banking portals and smartphone applications [apps]) in particular are becoming increasingly more reliant on technology. There is a chance that banks may miss out on the value benefits as offered by traditional human (in-person) connects, facilitated by the traditional business models that necessitate customers visiting a bank branch (Kulkarni & Dambe
As such, organisations are realising that the intangible aspects of a relationship that are facilitated through digital channels and services are not easily duplicated by competition, thus providing a sustainable competitive advantage (Roberts, Varki & Brodie
Based on this observation, it is arguable that digital technologies are fundamentally changing the global banking industry by blurring the traditional lines that define product, market and customer base (Pyun, Scruggs & Nam
In certain instances, however, new technologies and services may threaten replacing traditional banks in their entirety. Internet- or digital-only banks offer alternative approaches to online transacting and banking by making services available exclusively through online channels (websites) or by means of smartphone apps, thereby challenging traditional banking business models by eliminating the need to establish and maintain physical bank branches. Technology has fundamentally altered the creation, delivery, reception and utilisation of these financial products (Pyun et al.
In response to this, and with the advent of the 4IR, traditional (offline) banks may arguably experience increased pressure in growing and retaining their customer base while also addressing the heterogeneity expected by customers by means of digitalisation of consumer services (Pallant, Sands & Karpen
With the rapid pace of technological evolution, making the correct choice of digital platforms and tools to implement becomes critical to ensuring widespread user adoption, acceptance and overall success (Louw & Nieuwenhuizen
Despite the aforementioned perceived risks, digital-only banks challenge the
It is thus arguable that traditional banking business models (that predominantly require clients to visit a physical branch) as whole are being challenged; however, because of the very recent (in 2019) introduction of the digital-only banking concept in South Africa, very little to no research literature is available on the topic from a South African perspective.
To address this shortcoming in existing South African research literature, we survey the South African banking landscape and analyse the trends in digital consumer services on offer from a selection of traditional, offline banks. We subsequently compare our findings with the services offered by the first South African digital-only bank launched in 2019, noting the expectations of consumers and the differences in business models from a consumer services perspective (i.e. services that are delivered to consumers through digital channels such as websites, Internet banking portals, smartphone applications, mobile banking and also services that facilitate process digitisation such as point of sale [POS] devices that may be used to process digital payments) across both types of banks.
This research is novel in its kind as the concept of a digital-only bank in South Africa is still a very recent introduction (launched in 2019). The value of the research stems from the fact that early trend analysis and identification in a South African context, supported by technological advancement, is sure to liberate the digital banking landscape to a further extent, thereby providing guidance and supporting the development of further digital-only banking services and initiatives not only within South Africa (by analysing trends and encouraging further development), but possibly also on a global scale. This may further advance and contribute to the theory on digital business model formulation from a South African perspective.
These observations subsequently support the formulation of our research aim (RA), which was to determine if there were similarities between traditional and digital-only South African banks’ digitalisation efforts from a consumer services perspective. This includes services that are delivered to consumers through digital channels such as websites, Internet banking portals, smartphone applications, mobile banking and also services that facilitate process digitisation such as POS devices (terminals that may be used to process digital payments).
To address our RA, we identified two research questions (RQs):
Research question 1 (RQ1) – Which digital consumer services are offered by traditional South African banks?
Research question 2 (RQ2) – Which digital consumer services are offered by digital-only South African banks?
The rest of the article is organised as follows: We begin with a discussion on the chosen research method and design, followed by a presentation of research results. This is followed by an interpretive discussion section, while the conclusion is found in the last section.
An overview of the chosen research method and design follows next.
Per analysis of the South African banking industry, it was noted that in February 2019, South Africa recorded 19 registered banks, four mutual banks, four co-operative banks, 15 local branches of foreign banks and 30 foreign banks with approved local representative offices (South African Reserve Bank Prudential Authority
By analysing the total population of traditional banks in South Africa, a non-probability sampling method was chosen to select a sample of five traditional banks and one digital-only bank that were operational in February 2019. By means of convenience sampling, the five biggest ‘traditional’ banks in South Africa (hereafter collectively referred to as ‘traditional banks’) were subsequently chosen in February 2019 (Business Tech
Through further qualitative analysis and individual inspection of secondary data, a combination of online and offline sources (including research databases, publications, printed material, bank websites, online resources, digital publications and smartphone application-hosting platforms) were consulted on a first-hand basis to identify the digital consumer services offered by each bank. Data and results obtained for each bank were tabulated, commonalities and differences were identified and the results were consolidated into a single table. From a reliability and validity perspective, it was confirmed that the selected banks and services were still operational and delivered at the end of the second quarter of 2019 (i.e. end of June 2019), thereby justifying their inclusion in the sample.
By means of a comparative analysis, similarities (resulting in trends) and differences (identifying possible opportunities) in digital consumer services offerings were identified, noted and summarised by comparing the traditional banks with each other and also by comparing the traditional banks with the digital-only bank. As a result, the findings from the analysis from the comparative analysis of both traditional banks with traditional banks, and traditional banks with the digital-only bank, were tabulated separately. The presentation and discussion of these results follows in more detail next.
This article followed all ethical standards for research without direct contact with human or animal subjects.
As traditional banks have been around longer than digital-only banks, the analysis of digital services offered to consumers by traditional banks is discussed firstly.
As web banking technologies are certainly crucial to banks to be found in the digital age, it is imperative to have a web presence (Louw & Nieuwenhuizen
With a great variety of different Internet-enabled devices being capable of accessing websites, ensuring that bank websites are optimised for accessibility on any device becomes important (Louw
Once a user can find a bank’s website, they may also be inclined to conduct their actual banking online. The demand for this is reflected by Internet banking services being offered by all five banks (100%).
When moving away from web technologies and focussing on mobile and smartphone technologies, banking smartphone applications (apps) for Android and iOS devices are provided by all five banks (100%). Additionally, three out of five banks provide an app for Windows Phone devices, although three out of five banks also provide an app for BlackBerry devices. At a bare minimum, a smartphone app that is supported by at least two major platforms, most notably Android and iOS, is provided by each bank.
All five banks (100%) also offer their smartphone app as a zero-rated data app which means that no data usage costs will be incurred (as agreed upon by Internet service providers and mobile network providers) for end users when making use of the app to conduct their banking (Futter & Gillwald
To make use of any of these smartphone apps, however, end users would need to be in possession of a supported smartphone. As smartphones are typically more expensive than feature phones (especially in developing economies such as South Africa) and in certain cases may also be perceived as being more complicated to use (thereby defining an undesirable user experience, i.e. the overall experience of a person using a product and determining how easy or pleasing it is to use) than feature phones, users may choose to not be in possession of a smartphone (Louw & Von Solms
When exploring further opportunities that smartphones have to offer in a traditional South African banking context, POS technologies become of particular interest. A mobile POS system that can connect to a supported smartphone may further open up a world of small business prospects for entrepreneurs. This may not only assist with digitising informal trading, but also enhance an emerging economy by embracing a safer, cashless society. As it currently stands, however, only three out of the five banks (60%) have this service available. Fortunately, for larger organisations, all banks (100%) offer a standard POS system that they may make use of to process payments.
Overall, mobile- or smartphone-first banking does seem to be a strongly pursued component of the digital transformation trend in South African banks. This is evident from
Digital consumer services of the biggest five South African banks as surveyed during the end of June 2019.
Bank number | Web banking technologies |
Smartphone banking technologies |
POS banking technologies |
||||
---|---|---|---|---|---|---|---|
Website | Internet banking | Smartphone application (app) | Zero-rated app | Mobile banking (USSD) | Smartphone POS | POS | |
1 | Yes (responsive) | Yes | Android | Yes | Yes | Yes | Yes |
iOS | |||||||
Windows Phone | |||||||
2 | Yes (responsive) | Yes | Android | Yes | Yes | No | Yes |
iOS | |||||||
Windows Phone | |||||||
BlackBerry 10+ | |||||||
3 | Yes (non-responsive) | Yes | Android | Yes | Yes | No | Yes |
iOS | |||||||
Windows Phone | |||||||
Blackberry 10+ | |||||||
4 | Yes (responsive) | Yes | Android | Yes | Yes | Yes | Yes |
iOS | |||||||
BlackBerry | |||||||
5 | Yes (responsive) | Yes | Android | Yes | Yes | Yes | Yes |
iOS | |||||||
Adoption rate (%) | 100 | 100 | 100 (across all OSs) | 100 | 100 | 60 | 100 |
(Android, iOS: 5/5 occurrences = 100% adoption) | |||||||
(BlackBerry: 3/5 occurrences = 60% adoption) | |||||||
(Windows Phone: 3/5 occurrences = 60% adoption) |
POS, point of sale; OSs; operating systems; USSD, unstructured supplementary service data.
From the discussion and data presented in
web banking technologies (website, Internet banking)
smartphone banking technologies (smartphone applications, mobile or USSD banking, zero-rated data)
point of sale banking technologies (smartphone POS and standard POS).
Moreover, from these three major categories that were identified, that is, web banking technologies (website, Internet banking), smartphone banking technologies (smartphone applications, zero-rated data, mobile or USSD banking) and POS banking technologies (smartphone POS and POS), a smartphone-related element or optimisation is present in each. This is summarised in
South African banks mobile-first digital consumer services.
Category | Classification | Components | Smartphone focussed or optimised element present? |
---|---|---|---|
1 | Web banking technologies | Website | Yes |
Internet banking | |||
2 | Smartphone banking technologies | Smartphone applications | Yes |
Zero-rated app | |||
Mobile or USSD banking | |||
3 | POS banking technologies | Smartphone point of sale | Yes |
Point of sale |
POS, point of sale; USSD, unstructured supplementary service data.
Although not all banks offer all of the listed products and some may only offer a subset thereof, an undeniable mobile-first trend can be identified in each bank’s case. This is further exasperated by the ‘#datafree’ movement that allows certain apps, including banking apps, to be listed as zero-rated (i.e. not incurring data usage and download costs when transacting on the app to make mobile banking more affordable and accessible to all) on most major local network providers (Futter & Gillwald
As smartphones are typically more expensive than feature phones and in certain cases may be perceived as being more complicated to use than feature phones (Louw
This observation is specifically applicable in the South African banking context with all (100%) banks having chosen to support Android and iOS smartphone apps – the two most popular smartphone operating systems (OSs) not only in South Africa and Africa, but also in the world (Statcounter Global Stats
With a thorough understanding of traditional banks’ digital services on offer, we now revisit RQ1 (which digital consumer services are offered by traditional South African banks?) by stating that traditional banks have embraced digital service technologies specifically from a consumer services perspective by delivering a selection of web banking technologies, smartphone banking technologies and POS banking technologies. The majority of these services have notably also been optimised for use with mobile and smartphone devices.
The digital-only bank’s consumer services are subsequently summarised in
Digital consumer services of the first digital-only South African bank as surveyed during the end of June 2019.
Digital-only bank number | Web banking technologies |
Smartphone banking technologies |
POS banking technologies |
||||
---|---|---|---|---|---|---|---|
Website | Internet banking | Smartphone application (app) | Zero-rated app | Mobile banking (USSD) | Smartphone POS | POS | |
D1 | Yes (responsive) | Yes | Android | Yes | No | No | No |
Adoption Rate (%) | 100 | 100 | 100 (Android) | 100 | 0 | 0 | 0 |
POS, point of sale; USSD, unstructured supplementary service data.
With a better understanding of the digital-only bank’s digital services on offer, we now revisit RQ2 (which digital consumer services are offered by digital-only South African banks?) by stating that the first digital-only bank has embraced digital service technologies specifically from a consumer services perspective by delivering predominantly web banking technologies and smartphone banking technologies.
As a result, we now address the RA (to determine if there were similarities between traditional and digital-only South African banks’ digitalisation efforts from a consumer services perspective) by noting that in both cases, web banking technologies and smartphone banking technologies are not only a similarity, but also a priority. Both of these approaches arguably facilitate banking anytime, anywhere. This, in turn, highlights the elements of convenience and economic efficiency that have been found to have positive effects on consumer’s adoption intention and continuance intention of digital services (Lee & Kim
In the case of both the digit-only bank as well as the traditional banks in South Africa, the move to mobile applications to facilitate convenient consumer services delivery is thus undeniable. These results certainly highlight the early trends, arguably also defining minimum requirements for further market liberalisation and possible new market entrants. A discussion on these and other business implications follows in more detail next.
Key findings from this research indicate that at the end of the second quarter of 2019, all participating traditional banks offered users access to the bank’s website (responsive design), Internet banking services (via the aforementioned website), access to (at least) an Android and iOS smartphone app, local, zero-rated data rights for these smartphone banking apps, mobile banking via USSD options and POS systems.
A similar approach has been followed by South Africa’s first digital-only bank with emphasis (early in the race) being on making access available to the bank’s website (responsive design), Internet banking services (via the aforementioned website), access to an Android smartphone app (possibly because of Android currently being the most popular OS worldwide [Statcounter Global Stats
By revisiting our RA (to determine if there were similarities between traditional and digital-only South African banks’ digitalisation efforts from a consumer services perspective), it is possible to note that in both the cases of the traditional banks and the digital-only bank, mobile-optimised services were identified as a key digital business strategy thereby highlighting the importance of a mobile-first approach to not only banking services, in particular, but also digital business model formulation in general. This can be seen as the primary, practical implication resulting from this study.
This research has arguably thus achieved what was originally aimed for, with the research findings arguably also supporting the earlier discussion which indicated that with the advent of the 4IR, traditional (offline) banks may arguably experience increased pressure in growing and retaining their customer base while also addressing the heterogeneity expected by customers by means of digitalisation of consumer services (Pallant et al.
Despite mobile-optimised services arguably playing a big role in not only digital banking, but also general digital business model formulation going forward, mobile-first initiatives may, however, be perceived differently by different generations of users as follows (Murphy
Generation Z, or the digital age, are digital natives that usually prefer interactions through mobile.
Generation X, or the optimist, are ready to learn how to use and interact through digital and mobile channels.
Baby boomers, or pragmatists, are open to using digital channels and interacting through them to see if it is an improved experience.
Senior users (older generations), often referred to as the digital doubters, prefer more traditional banking interactions (such as going to a physical branch), but will try digital for certain activities if it proves to be helpful and easy enough.
As such, banks that are pursuing major digital- and mobile-first transformations should ensure that the needs of the full spectrum of customers are taken into account and consider delivering level-appropriate training and awareness to not intimidate or overwhelm non-technical customers such as seniors or digital doubters (Louw
As mentioned previously, however, technology (such as smartphones, tablets and phablets) to access these services are typically more expensive and may be perceived as intimidating or overwhelming from a user experience perspective (Louw & Von Solms
Dedicated access to infrastructure (such as a branch, technology devices, etc.) that allows access to digital banking facilities should thus not be completely disregarded in the move to digital. This has been acknowledged by a traditional South African bank that has experienced the most growth over the past 5 years – not only is it the youngest entrant to the market and offers fewer services than what its traditional bank competitors offer, but it also provides consumers access to selected dedicated branches 7 days a week as opposed to the 6 days a week that most competitors offer (bank number 2 in
In both the cases of the new entrant traditional bank and the digital-only bank, fewer services are offered than those of some competitors (see bank 2 in
These findings are, however, limited to only a select few South African banks and may not be representative of the South African banking landscape in its entirety – a limitation of this research. Despite this limitation, our research findings arguably imply that mobile-first, localised banking services are playing an increasingly important role in digital consumer banking.
Furthermore, while the overall South African banking landscape may be moving towards digital- and mobile-first, the need for physical access to technology and services, whether because of circumstance (lack of funds or resources) or by choice (technology avoidance), may necessitate not only mobile-first, but also accessible-foremost banking business models (i.e. 7 days a week, on-premises access to infrastructure and support that facilitates access to online banking technologies).
With the advent of the 4IR, many industries, including the banking industry, consider pursuing digitalisation across their business models and services to remain relevant. Traditional South African banks have acknowledged this fact by offering consumers access to their bank’s website (responsive design), Internet banking services (via the aforementioned website), access to (at least) an Android and iOS smartphone app, local, zero-rated data rights for these smartphone banking apps, mobile banking via USSD options and POS systems.
South Africa’s first digital-only bank has followed suit and provided consumers access to the bank’s website (responsive design), Internet banking services (via the aforementioned website), access to an Android smartphone app and local, zero-rated data rights for users making use of this smartphone banking app.
Although digitalisation might not necessarily prove to be a perfect solution for certain generations of customers (often referred to as digital doubters), mobile- or smartphone-first banking does seem to be a strongly pursued component of the digital transformation trend in South African banks. This arguably implies that a mobile-first user experience design across all digital channels is key to remain relevant with the advent of the 4IR. Furthermore, while the overall South African banking landscape may be moving towards digital- and mobile-first, the need for physical access to technology and services, whether because of circumstance (lack of funds or resources) or by choice (technology avoidance), may necessitate not only digital- and mobile-first, but accessible-foremost banking business models (i.e. 7 days a week, on-premises access to infrastructure and support that facilitates access to online banking technologies).
Despite the research being limited to only a select few South African banks and not necessarily being representative of the South African banking landscape in its entirety, the value of the research stems from the fact that early trend analysis and identification is sure to liberate the digital banking landscape to a further extent, thereby supporting the development of more digital-only services and digital-related entrepreneurial initiatives on a broader scale. This research has contributed to understanding the trends in South African digital banking, specifically from a consumer services perspective.
Future work could include focussing on analysing the entire South African banking population (and not just a sample) to provide a more holistic view of trends and expectations across all traditional and digital-only banks that operate in the country. This may be followed by conducting similar studies for international banks, thereby offering an opportunity to identify global digital banking trends.
The authors would like to thank Brenda Lotriet Louw for proofreading this article.
The authors declare that they have no financial or personal relationships that may have inappropriately influenced them in writing this article.
All authors contributed equally to this work.
This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.
The authors confirm that the data supporting the findings of this study are available within the article.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any affiliated agency of the authors.