BANKING IN AFRICA: STRATEGIES AND SYSTEMS FOR THE …

1 BANKING IN AFRICA: STRATEGIES AND SYSTEMS FOR THE BANKING industry TO WIN IN THE FOURTH INDUSTRIAL REVOLUTION. By Ellen Ohene-Afoakwa and Solomon Nyanhongo2 BANKING in Africa: STRATEGIES and SYSTEMS for the BANKING industry to win in the fourth industrial Revolution. By Ellen Ohene-Afoakwa and Solomon Nyanhongo1. INTRODUCTION BANKING sector in Africa is at cross roadsIf the BANKING industry continues with the business as usual approach, it faces the risk of failure and going into extinction. We have Nokia, Kodak, Post office services as examples from previous revolutions. The need to put in place STRATEGIES and SYSTEMS that are agile, scalable, provide rapid service, ideally at real time and expand areas of contact with client in a safe environment where client data is protected is key to making BANKING in Africa still relevant in the fourth industrial revolution. The competition from Financial Technology Companies (Fintechs) and Mobile network operators (MNO s), which are providing the same financial services in a better way, threatens the survival of the current banks.

2 What was at stake after the global financial crisis of 2007-2008 was the continued existence of many banks, but what threatens us today is the survival of BANKING industry itself. John Chambers, former CISCO CEO, stated that up to 40% of the world s biggest companies will not exist in a meaningful way after the next decade, if they do not adequately prepare themselves for the 4th industrial revolution. The BANKING industry will have to undergo a very complex, uncertain and drastic strategy and SYSTEMS adaptation if they want to be part of the financial industry of the presentation covers the technological transformation and opportunities brought about by the fourth industrial revolution and the need to have the right strategy and SYSTEMS in place to be able to take advantage and win. It discusses the different STRATEGIES and its impact on the BANKING industry in Africa. The recommended STRATEGIES and conclusions are arrived at through the practical learnings gained from our Africa Expansion Journey which took us to South Africa, Mauritius, Zambia and Senegal, in addition to interviews with some key stakeholders in the BANKING The Need for the Right Strategy and SystemsWhat comes to mind when you hear the word Strategy?

3 Richard Rumelt, Professor of Business and Society at the University of California, claims that there has been an unfortunate tendency of equating motivational slogans and financial goals with strategy. A good strategy is a specific and coherent response to- and approach for- overcoming the obstacles to progress, like responding to changing market good example of how an effective strategy can transform an economy, a sector or a company is the country of Mauritius. In 1960, the country was a mono-crop economy which was supported by sugarcane. Today (2017) Mauritius is a well-diversified economy ably supported by Agriculture, Tourism, financial services sector, information technology centres and has become a vibrant business hub. More than 25 000 global companies with investment interests in Africa and India have established their head offices there. The country strategy is understood by all its stakeholders- whether we were talking to government officials, private sector community, the economists or the ordinary men on the street, the national strategy what clearly understood by all.

4 According to Francisco Gonzalez, Group Executive Chairman BBVA, the strategy and the SYSTEMS required in the 4IR can only succeed if it is guided by clear vision, committed leadership and firm Principles of prudence. The Fourth Industrial Revolution (4IR)We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. Klaus Schwab, Founder and Executive Chairman of World Economic Forum, stated that the First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production and the Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution which is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace.

5 It is an era driven technological advances that enable the capabilities of the smartphones in our pockets, a mix of low-cost and high-power computers, high-speed communication, smarter robots and augmented (artificial) intelligence. According to Brad Stulberg, Researcher and columnist at New York Times, the Fourth Industrial Revolution is now. The ability to realize these gains will depend, in part, on the STRATEGIES during these early years which the players adopt and the willingness to reframe their business and operating models to make the most of this new technological in Africa: STRATEGIES and SYSTEMS for the BANKING industry to win in the fourth industrial Revolution. By Ellen Ohene-Afoakwa and Solomon Opportunities being presented by the 4 IRLike revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world. Below are some opportunities which the 4th IR presents: Access to the digital world.

6 Technology has made possible new products and services that increase the efficiency and pleasure of our personal lives. Buying a product or a Service, making a payment, transferring funds, listening to music, watching a film, or playing a game- any of these can now be done remotely. Technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and productivity. The new technologies have created entirely new ways of serving existing needs and significantly disrupt existing industry value chains. Disruption is also flowing from agile, innovative competitors who can oust well-established incumbents faster than ever by improving the quality, speed, or price at which value is delivered. Enhancement of organization s ability to fulfil customer expectations. Customers are increasingly at the epicenter of the economy and companies, which is all about improving how customers are served.

7 There is also growing transparency, consumer engagement, and new patterns of consumer behavior (increasingly built upon access to mobile networks and data), which presents opportunity for companies to adapt the way they design, market, and deliver products and services. Opportunity to shape industry regulations. Legislators and regulators in the BANKING industry in Africa are being challenged to an unprecedented degree and for the most part are proving unable to cope. Business must collaborate more with regulators to reinvent the regulatory framework and also to ensure they truly understand what it is they are regulating. How can African Banks, whether large or small, strategize and put in place the right SYSTEMS and still remain relevant in this fourth Industrial revolution? Below strategic solutions which the BANKING industry in Africa needs to employ in order to successfully navigate the challenges and take full advantage of the massive opportunities coming with the WINNING STRATEGIESA research by Norbert Schwieters, Partner with Pricewaterhousecoopers (Pwc) Germany, suggests that the Industrial Internet presents unprecedented potential gains for companies that claim leadership roles.

8 Their ability to realize these gains will depend, in part, on their actions during these early years: the capabilities they build and the extent to which they reframe their business and operating models to make the most of this new technological Rethink Your Business ModelKevin Benedict, Thought leader and Founder of Digital intelligence, pointed out that transforming an enterprise is always difficult, but when an enterprise is highly profitable - digital transformation is even harder. The temptation to follow the maxim, Don t fix what isn t broken, is just too compelling. When you average 8% income growth for 35 years, it can breed a sense of, Why do we need to change? Things are working, John Mackey, CEO of Whole Foods, said in a recent interview with The Wall Street Journal. Today, however, Whole Foods is struggling to compete with other lower priced grocery stores that have embraced organics and healthier foods.

9 If you take your eye off the game for a second, consumers will change directions on you. The challenge enterprises are faced with today is that digital technologies are changing the way consumers behave faster and in different ways than executives have ever seen before. Today s profits can hide or mask the serious problems of Disruption in the business worldThe business world has become accustomed to disruption and incumbents that cling to old business models lose ground to startup s that introduce new products and services at much lower prices. The next industrial revolution will accelerate this sequence, especially in BANKING , by reducing costs and improving efficiency at a broad scale. Companies that are slow to change will lose to those that rethink their business models to take advantage of the new platforms and the new opportunities. Banks cannot make money indefinitely by following its traditional business model as more flexible competitors (Disruptors) are taking market share.

10 4 BANKING in Africa: STRATEGIES and SYSTEMS for the BANKING industry to win in the fourth industrial Revolution. By Ellen Ohene-Afoakwa and Solomon Cut back on archaic, legacy activities and measurementsSignificant investments in Research and Development, operations, and customer experience and have to cut back legacy activities that no longer apply. This will take perseverance and discipline, but your competitive advantage lies with your role in the infrastructure of the future. Selling or shutting down less essential practices, and focusing your portfolio of products and services more effectively, can make you fit for growth in this new world. There is need to shift measurement of BANKING profitability using traditional financial measurements like profitability, loans market share etc and start measuring an organization s level of investment into the future. In Senegal UBA bank has started the tracking of non-financial measurements as key success factors.