‘Renew and new’ way forward for banks in Africa

As the leader of Infosys Finacle, what trends do you see in the financial industry?

At Infosys Finacle, we have the privilege of working with banks in 84 countries. Across these markets, I see four forces that are reshaping banking, faster than ever. The first driving force is the rapidly evolving customer preferences and demands. Today, banks are dealing with the most informed, connected and sophisticated customer in history. The segment-of-one is clearly emerging. Progressive banks are responding to this by making their business truly customer specific and are aiming to delight customers with contextual products and services. To succeed, banks need to offer fully personalised services. Big data analytics will play a big role. Banks would need to manage all the three dimensions of big data, the three Vs — volume, variety and velocity. Effective usage of data will empower banks with enhanced customer insights and better decision making. The next key driving force is clearly the rapid evolution of technology, most visible across mobility, big data, social, artificial intelligence, Internet of Things (IoT) and cloud. Mobility is currently the most important theme for banks, closely followed by big data and social channels. These technologies are disrupting the way consumers interact with banks and the way businesses are run. Banks that effectively use new technologies to better understand and serve their customers will emerge as leaders in the industry and continue to gain a competitive advantage. These technologies will also disrupt the traditional business models and lower the entry barriers for new competition. And this brings me to my next observation on key trends – Changing Competitive Landscape. Today’s banking landscape has not only grown fiercely competitive, but also developed facets that never existed earlier. One of these is the entry of non-banking players, especially from the tech, retail and telecom space, riding on nimble, cost efficient business models. In our recent research, 45 per cent of the banks admitted the threat from tech companies such as Google, Apple and Facebook as high. To address this, traditional banks need a superior capacity for innovation — bringing innovations to market faster and continuously. Banks also need to develop value-based partnerships with other ecosystem players to offer greater value to their customers. The last critical driving force is continued pressures on margins and profitability, compounded by increased regulatory oversight. The provisioning of larger capital and liquidity is placing great strain on banks’ balance sheets. It is on top of cost inflating consumer protection regulations. To maximise revenue and reduce operating costs, banks recognise that continuous innovation is the key to success. In 2014, 61 per cent of banks in our research indicated they have an innovation strategy, a significant increase from 37 per cent in 2009. These forces are reshaping business of every organisation. To me, the dual strategy of ‘New and Renew’ will be critical in this era. While banks need new capabilities to help their businesses grow in new ways, they also need to renew their existing systems, opening them up to benefits of mobility, analytics, cloud computing and connected systems. At Finacle, we see this as a great opportunity to help banks renew the core of their business as well as to expand into new frontiers.

What’s your outlook for the banking business in 2015? What are banks seeking currently?

With economic growth expected to improve, expectedly banks across the globe will look to maximise revenue generation opportunities. The focus, of course, is clearly on enhancing return on equity by boosting profits and reducing costs. Core to this will be to make business truly customer specific and create opportunities for deeper, more valuable engagements. Banks are also cognizant of the importance of being a first mover — or at least a fast follower — in leveraging modern technologies towards the above goals. However, in most cases, the severe complexity of their operations and existing legacy applications is impeding their march. In many cases nearly 80 per cent of annual IT budgets are spent on simply supporting existing business operations and enabling organic growth, leaving little for business transformation for the creation of new revenue streams. However, this issue is clearly getting the top attention now. Banks are looking to renew their existing platforms and leverage modern technology to generate new revenue sources and accelerate profitable growth. Everyone is keen to move investments from the ‘keep the lights on’ to ‘driving and adopting innovations’. We are collaborating closely with our clients in this journey.

What are your immediate priorities in taking on the new role as Global Head of Finacle? Where do you see Finacle in the next five years?

At Finacle, we have nurtured a very robust banking platform. Today, we have installations in 84 countries. Our solutions are serving over 450mn customers, which is equivalent to 18 per cent of world’s banked adult population. Finacle is proven to be the most scalable core banking platform in the industry today and is consistently rated as a leader in the industry. Most importantly, assessment of top 1000 world banks reveals that banks powered by Finacle enjoy 50 per cent higher returns on assets, 30 per cent higher returns on capital, and 8.1 per cent points lesser costs to income than others. My priorities are to build upon Finacle’s current strengths and enrich it further by leveraging latest technologies in the areas of mobility, advanced analytics, social, cloud, artificial intelligence, wearables and digital commerce. We are making industry-leading investments in R&D to help our clients refresh their business models leveraging latest technologies. We have a clearly defined 2020 strategy. Our pursuit is to continuously enrich and enhance Finacle to make it the best banking platform the world has even seen. We are committed to ensure Finacle and our clients stay ahead of the curve.

What are the key technology requirements for African banks today?

During last year, the African economy was one of the fastest growing economic regions in the world. As per World Bank, regional GDP growth is projected to pick up to 5.1 per cent by 2017, lifted by infrastructure investment, increased agriculture production, and buoyant services. Retail banking in sub-Saharan Africa is estimated to grow at a compound annual rate of 15 per cent, putting banks across Africa on the cusp of growth. Many large and mid-tier banks aspire for expansion across the continent, either organically or through acquisitions or both. Mobile offerings continue to be a key driver of innovation and growth. However, lack of adequate channel integration can compromise the industry’s ability to deliver seamless experience, which is sparking a demand for multichannel capabilities. The focus on leveraging latest technologies to reach out to under banked and unbaked segment remains a key priority. In select markets, banks are looking at systems for trade finance and Islamic banking solutions to create new revenue streams. Besides, banks are also looking at business intelligence and customer analytics to differentiate their offerings and to expand market share. A significant number of African banks are in the process of renewing their technology landscape to be agile and meet the emergent demands. Broadly, the multinational banks are looking to overhaul technology infrastructure and achieve standardization across countries. The consolidation of systems and processes is a key priority to improve operational efficiency and enhance control over their operations. Mid-size banks seek flexible and scalable platform that enhances their competitive edge to support their growth ambitions, apart from augmenting digital channel banking capabilities. The smaller banks, with limited resources seek to limit both capital and operating expenses by leveraging cloud based deployments. Along with economic growth, central banks across the continent are focused on policies for enhancing financial inclusion. This will require banks to enhance their reach and bring the vast unbanked and under-banked population into the banking institutional. Technology will play a pivotal role in this endeavour.

Where does Africa figure in Finacle’s global plans? What is your approach in the Africa market?

Africa is certainly one of the important regions for Infosys Finacle. Today, it accounts for over 20 per cent of Finacle’s global customer base. We have a presence across 18 countries in the continent. With economic activities escalating across multiple countries, the financial system needs to keep pace, by leveraging modern technology. We see this as a great opportunity. We have been investing to enhance our regional presence and have localised our solutions to meet native requirements. We have also been developing a robust ecosystem of empowered partners to strengthen our capabilities and provide full range of services and support to our customers in the market. Over the years, we have consistently added new clients and won multiple new projects. We are working with many leading banks in the region such as Standard Bank, Equity Bank and United Bank of Africa and First Bank of Nigeria, among many others. We are confident that the region will continue to propel our growth and we continue to be the preferred partner to the financial institutions here.