By Kennedy Mubita, Africa Head, SC Ventures.



Imagine a bank whose customers can tap on a wearable device to make a payment, regularly receive updates on changes they could make to their investment portfolio through AI-generated insights. A bank that enables its customer to own their data through the application of blockchain technology and share it with lenders as a validated credit history when applying for a loan anywhere; that bank is likely to remain fully operational for the long term.



According to a PWC global CEO survey, 70% of financial services leaders stated that the speed of technological change is one of their biggest concerns. Clients demand more convenience and customization from their banks, delivered through technology-driven innovation. This trend will accelerate as other industries digitize, allowing microservices to be monetized. New technologies are tooling up non-traditional players such as Neobanks, mobile network operators, e-commerce platforms, and supermarkets with the means to tokenize exchange and intermediate supply chains exclusive of traditional banks. These new entrants in the financial sector are a competitive threat to conventional regulated players. For banks to survive and win in this new paradigm, they will need to adopt technology-driven business models; they must develop an internal culture that is tech-minded, encourage idea generation and execution across all departments. But change doesn&#8217;t happen in a vacuum. For impactful transformation, banks will need to involve their clients, employees, and communities to build solutions that meet evolving needs across a broad social spectrum.



<h2 class="wp-block-heading">Collaboration is a crucial ingredient</h2>



Digital transformation can only be optimal through a collaborative effort by partnerships with the clients, the Fintech community, regulators, service providers, and other financial services providers applying digital tools to meet their financial goals. Hence, we see traditional banks partnering with FinTechs, MNO&#8217;s, and digital marketplaces by design or necessary survival. These alliances are symbiotic in that the Fintechs see three evolving challenges. First, as they build new digital business models, their activities are becoming economically significant; hence the Central Bank, other regulators, and Governments are getting concerned about potential downside credit and systemic risks. Their days of minimal or no regulatory oversight are coming to an end. Secondly, traditional banks are not sitting back and are beginning to incorporate digital solutions in their processes and strategies. Thirdly, at scale, traditional banks still dominate the sovereign, corporate finance, and long-term lending markets.



On the other hand, while banks lack agility and sufficient qualified and digitally literate managers, they have trusted compliance capabilities. They are accustomed to the regulatory minefield and can help FinTechs navigate that space. Partnerships with banks lend credibility to the Ventures they participate, and in so doing, there is a reverse transfer of skills from the banks to FinTechs. Banks can &#8220;stand in the gap&#8221; between Regulators and FinTechs interpreting the use of new technologies to address regulatory concerns. For instance, Financial institutions can address the issue around authenticating a person&#8217;s human identity when opening an account through the internet of things (IoT) and artificial intelligence (AI). These technologies use various metrics, including location services, user image movement, facial recognition, and temperature checks, to determine whether the person operating the device is an actual human.



Standard Chartered recognizes that technology-driven enablement and partnerships can facilitate the resolution of challenges facing various sectors. For example, small and medium-sized enterprises require access to finance, markets, and simple digital business efficiency tools. Guided by this, SC Ventures, a Standard Chartered business unit, was set up to promote innovation, invest in disruptive financial technology, and explore alternative business models. The business unit provides a platform for collaboration with Fintech, clients, and partners across our markets, connecting them to staff and SCB departments as appropriate.



In Africa, we leverage digital capabilities to resolve social challenges and accelerate economic growth for different market segments. For instance, in Kenya, SC Ventures is currently piloting a digitized and automated water infrastructure system for a water and sanitation company. The Internet of Things-enabled smart water meter solution will reduce leakages, improve revenue collection, provide a platform for remote connections management while aiding in reducing operations and maintenance costs.



SC Ventures at Standard chartered is committed to working with local and global financial technology players who are innovating and developing curated products for these underserved or unbanked market segments that were erstwhile, not reachable due to lack of infrastructure and digital platform.



The community of stakeholders in financial services sectors and other industry verticals enabled by the 3rd and 4th industrial revolution technologies creates a global data lake that will be a massive enabler of innovation in the financial services sector. By gaining API access to various data sources, banks can create customized solutions for different clients across the region. Digital access will minimize direct contact with banks. Soon, data portability, possibly using distributed ledger technology (DLT) through data banks, will allow customers to use their data as an asset by being part of a community or use it to receive bespoke services.



The future of finance is commoditized services on a network of data connected to value; this enabled by ever-increasing research and technology advancements such as 5G and quantum computing. These tools will vastly change the financial ecosystem, and banks that evolve quickly will be better positioned not only to survive but to thrive.

Duncan Willetts

Disruptive digital solutions is rewiring the DNA of Banking

By Kariuki Ngari, CEO &amp; Managing Director, Standard Chartered, Kenya &amp; East Africa



COVID-19 has upended the social and economic systems and many sectors have experienced major operational and tactical shifts. The pandemic has accelerated digital integration in many sectors; Financial Services and Banking wasn’t left behind with clients demanding to see a level of technological integration that will allow them to continue operating by accessing their accounts uninterrupted. This shift is likely to drive expectations going forward. The change, though rapid, has been easier on agile Organisations that had already incorporated technology in their processes; allowing them to quickly scale up to meet client demand for tech led solutions.Conversely, institutions that were slow adopters of technology have had their digitization process accelerated in the past year. In the banking sector for example, the traditional legacy banking model status quo has been challenged by consumer bias towards digital solutions coupled with the safety measures imposed by the government. This has led to an increase in clients transacting digitally as opposed to transactions in traditional platforms like the branch.



Feeding into this digital shift, is the upsurge of Fintechs in the Kenyan market, on the back of increased adoption of mobile money services.&nbsp; The Fintech revolution in the country has challenged and transformed the banking ecosystem allowing for greater innovation in payments, credit and savings products. Further grounded by an enabling environment, Fintechs have found a fertile environment for growth, supported by a growing digitally savvy and financially literate middleclass. It is clear that Fintechs will play a significant role in advancing economic growth and enhancing financial inclusion in the region.



Many arguments have been made regarding the role of Fintechs and Banks; whether they are competing or collaborating. At Standard Chartered we believe collaboration is the only way to go. SC Ventures &#8211; an innovation hub that serves as a platform to collaborate with Fintechs in Kenya and the broader African region, has helped us develop new business models and services that meet the needs of our current and future clients. By allowing FinTech’s to undertake a Proof of concept( POC) in a controlled environment, we can be able to test ideas before launching to the wider consumers – This platform has allowed the Fintechs with good ideas to compete and have a platform to test them and also importantly for the Bank to learn more about innovation.



It is clear that tech innovation in the Financial Sector has numerous advantages; we also need to be cognizant of the challenges it poses. Tech provides transactional ease but also carries the risk of depleting the human touch and increased cyber in-security. To mitigate this, we in the Financial Sector need to utilize technology to optimize customer engagement and satisfaction. We should also use the most up to date security technologies to protect client and users of digital services for it is only when clients and customers are confident on the security of their funds or access will they continue adopting technology for everyday use.



By leveraging tech to gather data and derive insights, banks are better placed to provide a customized experience that caters to specific client’s need. When clients feel that we understand them, they are less likely to demand a human interaction all the time but only for the most complex of financial matters.



<h2 class="wp-block-heading" id="block-b4ac1a23-f749-4c73-a729-cd66c617479e">The future of work</h2>



As Financial institutions build agile systems for digital innovation, transitioning into new ways of working will be an integral part of the digital transformation journey. &nbsp;COVID-19 has seen most banks transition their employees to remote working &#8211; a move that has unearthed the need for effective collaboration tools, improved network capacity and strong security solutions.



A critical part of this being data security. In the age of big data, brand trust is hedged upon high data privacy and security. With large amounts of client data, Financial Institutions must invest in the right infrastructure to protect the organization’s assets. With internet fraud on the rise, strict monitoring systems are a non-negotiable. This will have to be complemented with absorption of the right talent and implementation of strict security protocols to ensure ongoing cyber security.



<h2 class="wp-block-heading" id="block-a8167aab-5e09-4cf8-9a59-bcfe77de06da">The future of banking</h2>



As economies gradually open up, it is expected that the number of transactions will increase, albeit slowly. More than ever there will be increased demand for convenient and efficient banking solutions. To meet this demand, organizations that invest in digital technologies will be better positioned for growth.



Further, innovation will be central to growth and strategic collaborations and partnerships in the sector will help advance an integrated digital banking ecosystem.



At Standard Chartered, we’ve seen an increased appetite for banks with diversified and integrated networks backed by efficient digital platforms. Since 2018, the Bank has heavily invested digital solutions a cross Retail, Commercial and Corporate Banking. Our award winning fully digital retail bank, now operational in 9 countries across the Africa continent, allow our clients to open an account, transact, invest and protect their wealth. With over 70 services available on the platform, our clients are also able to buy insurance, trade in government bonds and invest in some of the most competitive mutual funds across the globe. By continuously incorporating client feedback in product development and aligning with different partners to solve for client needs, we have seen a huge uptake and utilization of our digital platforms, a clear indication that integration is fundamental for consumers across the continent.



COVID-19 brought about an unprecedented crisis and shook up most business continuity plans. Banks that will thrive will be those that will set up new systems and structures that are consumer led. Local banks have the capacity and resources to build innovative and sustainable economies- all we have to do is adapt and disrupt.

STANDARD CHARTER BANK

The future of banking; digitization and collaboration as growth accelerants

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Africa is home to some of the fastest growing economies in the world and the stats show how moneyed its populations are; high-net-worth individuals, according to the World Wealth Report, grew by 8.1% in Africa last year, with overall affluence increasing by 10.7% – faster than anywhere else in the world.
“We definitely see this trend continuing far beyond 2018. There is an entrepreneurial spirit sweeping the region. As we see technology permeate all areas of the economy, individuals are using this access to start new businesses and expand beyond city centers and geographies. It’s these entrepreneurs who are creating wealth for themselves and their families,” says Duggal.
The wealth needs of Africa’s diverse, growing middle class population, estimated at 300 million people, are intricate, with most countries being emerging economies and wealth being a relatively new notion for many. The African Lions report defines the continent’s middle class as “not in poverty” and having “disposable income and discretion”. The African middle class, says the report, also has a tertiary education that has been completed or is underway; they have money to fall back on in times of emergencies and access to a computer with email and internet.
“This particular growing middle class is looking for means to save for their first home, pay for their children’s education and set money aside for retirement. In many cases, they are the first ones in their families to attain surplus wealth, so often, there is a need to care for their aging parents or other relatives,” notes Duggal.
Saving early and doing so prudentially is key, however there is a need to dispel the sentiment that a considerable amount of cash is required to start investing. Many banks cater for basic savings plans that allow for a fixed amount to be put away each month. Standard Chartered, for example, offers a vehicle where money can be invested in a diversified portfolio of globally-recognised mutual funds. In South Africa, tax-free savings plans that are comprised of unit trusts and other investment vehicles intended to bolster savings are also gaining popularity, with the likes of Allan Gray and Old Mutual offering similarly structured products.
<blockquote class="td_quote td_quote_left">THERE ARE CHALLENGES WHICH NEED TO BE ADDRESSED BUT I WOULD SAY THERE ARE FAR MORE OPPORTUNITIES THAN CHALLENGES.</blockquote>
The best place for one to start creating wealth, Duggal tells us, is to become financially literate and to understand the options available as an investor. “Of course, every investor is unique and their investing is solely dependent on their individual client risk profile and personal preferences.”
On the trends in Africa, Standard Chartered sees real estate as a favored asset class for many with developers turning to mixed-use projects as a means to boost their bottom lines. There is also a marked increase in technology start-ups with the rise of mobile devises – an IDC report shows that the African smartphone market reached an estimated 95.37 million units in 2016; although feature phones still rank number one, homegrown manufacturers such as Mint Mobile in South Africa are coming to the fore with a ‘Made in Africa’ solution to meet local smartphone and tablet demand. And while asset classes invested in Africa’s natural resources and commodities are popular, a portion of their money can also be found in offshore investments.
From the bank’s perspective, diversification across both asset classes and geographies is vital to reducing overall risk, which is unique to the individual with investment power dependent on their existing risk profile as well as personal preference. But generating wealth substantial enough to be able to invest it is not without its challenges, which includes high inflation, illiquid markets, a lack of information and credible research data however, Duggal is confident the pros outweigh the cons.
“We are optimistic that many African economies will continue to grow in the long run amidst certain shocks here and there. There are challenges which need to be addressed but I would say there are far more opportunities than challenges,” he says.
<h3>MILLENNIAL MENTALITY</h3>
There is a growing consensus that the millennial generation currently has the greatest buying power – projections put this number at between 80-90 million in America alone and thus, millennials are at the core of the majority of industries today. Wealth management is no exception.
The millennial generation, in particular, has been exposed to significant global, social and economic change in relation to previous generations. Millennials are distinguished by their impatient nature and have different attitudes towards how to manage their assets. It is for this reason that Duggal believes that it is crucial to have a conversation with the bank’s younger private banking and investment clients to explain their investment profiling and look at how they can invest their money, saying that “a millennial investor has no issue with understanding the math behind a solution, yet, we lose them over a traditional paper and pencil explanation. Millennials want to understand how the advisor thinks and analyses through a screen and a dynamic tech solution. It is important to get them to see how the right kind of advisory platform can help them make an informed decision in terms of their investment.”
A key driving factor amongst millennials in their decision making is their need to change the world. According to EY, a millennial is twice as likely to invest their money in a company that is focused on social or environmental issues. This bodes well for sustainable investments, which currently represent 18% of assets under management in wealth and asset management classes.
“They need to know where their money is put, and they want to make sure that this it serves their purposes. This would require vast research and a restructuring of product offerings,” explains Duggal.
<h3>HOW DO THEY DO IT?</h3>
So what qualifies Standard Chartered to advise its clients on where to put their money?
“We have strong advisory capabilities and a specialist model, which makes us unique in the market. We also leverage on our local market knowledge. We have had a presence for over 100 years in many of the countries we operate in… We are deeply rooted in Africa and can confidently say that we are ‘Here For Good, Here For Africa’. The bank also has a global footprint. It is because of this that we are able to combine global, regional and local knowledge to best serve our customers,” says Duggal.
From within, Duggal believes in the importance of nurturing the bank’s young talent. Standard Chartered has programmes to invest in its talent across all levels of seniority – a leadership programme aimed at its senior managers and heads of business helps them grow within the business. Similar programmes are in place for junior employees with the objective of upskilling them, where they can travel on short-term assignments for up to a year to more established markets to help them to gain a better understanding of how these markets work.
As business as a whole moves into a more global space, it is more important than ever to develop programmes that aim to bring about a diverse range of skills and experience and nurture talent by encouraging mentorship at all levels – the Boyden Talent Management Trends in the Banking Industry 2017-2018 report notes that “The best talent wants to work for innovative companies that offer learning opportunities and financial institutions must win the talent war in order to succeed in their efforts to recruit and retain individuals most suited for their organisation. This flexible and focused workforce will help build an organisation that is digitally savvy and flexible enough to adapt to current and future changes. To this end, having leaders and recruiters with experience in transformational change is essential.”
With the prospects in Africa riper than ever before, we can certainly look forward to seeing Standard Chartered putting their money on the continent, along with their clients.

Author: Standard Chartered

FORBES AFRICA SOCIAL MEDIA

Disruptive digital solutions is rewiring the DNA of Banking

The future of banking; digitization and collaboration as growth accelerants

STANDARD CHARTERED’S GAUTAM DUGGAL ON WHY AFRICA IS A GOOD BET FOR RETURNS