Nedbank is looking to become Africa’s most admired bank by all of its stakeholders. With investments into its branch network, its digital capabilities and its growing continental presence, this vision is looking more and more realistic every day.
Of all the challenges that face modern businesses, there is one which still seems to perplex many leaders. How do we manage the movement of services from a physical to a digital environment? It seems absurd that not all businesses are comfortable in the digital space considering it has now been over 30 years since the so called ‘digital age’ began taking root in organisations around the world.
The digital age, also called the information age, is defined as the time period starting in the 1970s with the introduction of the personal computer and subsequent technology providing the ability to transfer information freely and quickly. This ability has changed the way businesses function forever – we now have companies that are 100% digital and have no physical components whatsoever; no buildings, no paper, no cash, no equipment; almost nothing tangible apart from a device that can connect to the internet. But what about an organisation of significant size? What about a business that functions across many different territories? Is it possible to be an industry leading business while effectively managing both a physical and digital environment?
No company can safely ignore the changes wrought by digital technologies and even though there are now clear strategies that are proven to work in the digital space, many companies still agonize over whether to invest significant resources in digital capabilities. Those that have done so tend to run their digital operations as independent business units—the way companies prefer to manage them, as opposed to the way customers expect to use them.
According to Darrell Rigby of the Havard Business Review, a major problem is that companies often ‘fail to account for how customers have changed: They now weave their digital and physical worlds so tightly together that they can’t fathom why companies haven’t done the same’.
Fortunately, not all companies are struggling to balance the digital and physical spaces; there are some that have embraced both sides of the market place. In South Africa, Nedbank has invested heavily in both its digital and physical presence. This is a business, and an industry, that has had to take control of both spheres to satisfy demand from a population that is increasingly going digital for its services but also requires a strong branch network to complete the customer experience.
Nedbank has over 30,000 employees and its fast-growing footprint has increased hugely since 2010 bringing its current points of presence to over 700, including the sales and service outlets and kiosks. Nedbank has also invested in building its innovative, alternative distribution outlets through its eight-year strategic partnership with Pick n Pay and Boxer Stores – enabling communities to gain access to financial services every day of the week, including Sunday’s and public holidays.
An investment of over R1.4 billion in infrastructure expansion and refurbishments in recent years has allowed Nedbank to ensure that 79% of the bankable population are within a 15 km radius of a Nedbank point of presence.
Dean Retief, Nedbank’s HR Executive – Organisational Effectiveness, tells Enterprise Africa that currently the challenge is to digitise the workplace to complement the already excellent digital and physical set-up.
DIGITALISATION
“From an IT perspective, we are definitely going on a journey of digitalising the workplace as well as digitalising the client space. I think from a banking perspective, next year we’re starting on our digitalisation process in the workplace in alignment with the progress in the client space,” says Retief. “We definitely understand that unless we digitalise the workplace then the service that we provide to our clients is fictitious as they’re not experiencing the full package.
“From a generation perspective, the guys in management and senior management positions are probably not a generation that has been digitalised. The new guys that are coming on board in the graduate space and in the learnership space are far more digitalised. There’s definitely a challenge in Nedbank to understand how we can change how we do things and that is going to be tough for not only Nedbank but also all large corporates around South Africa.”
Nedbank is an organisation that is always adapting to new situations and internally, the company is looking to learn how the digitalisation process can benefit from within.
“The main challenge that we face is realising the value of digitalisation meaning how we collaborate, how do we learn, how do we share ideas around the digitalisation of the work place. We’ve done some smaller prototypes within the leaning programmes as an example of how people can use chat rooms and Skype to chat to one another. It’s not something that is fully embedded in the organisation from an employee perspective but it’s definitely something that we’re going to have to change as we move forward in the banking business,” explains Retief.
“We want our new generation to adapt the current environment rather than adapt tothe current environment,” he says.
In terms of services for the customer, Nedbank is now a truly ‘digical’ (digital-physical) business. According to the Harvard Business Review, ‘a digical-savvy company thinks systematically about each piece of the customer experience. It develops innovative components and weaves them into a holistic system that extends competitive advantages and accelerates growth’.
Dave Woolnough, Head: Retail Digital & Mobile at Nedbank says that while digitalisation has benefits for the customer, it also has financial benefits for the bank.
“There is a big drive towards digital for a number of reasons,” he says. “Firstly, it’s about convenience for the client and secondly it’s about driving down cost for the bank. There’s enough investment across the financial industry to acquire more digital technology in a servicing capacity so that customers can almost serve themselves.”
With all of the investment into new online services, is it possible that the branch network could one day become obsolete? While there are many European banks that exist without a branch network and operate pretty successfully in a purely online environment, Nedbank won’t be going down that path just yet.
“I do believe there will be a case for retail stores, certainly for the foreseeable future,” says Woolnough. “There has to be a presence; somewhere where people can have a face to face conversation and the adoption of a full digital strategy will take some time so I think the branch environment will absolutely remain for at least the next five years. At Nedbank we see the branch network as a key part of our strategy in the future but we will be moving more and more towards digital to improve the client experience and client engagement.”
In fact, the branch network has received significant attention over the past few years and a major strategy has emerged, the ‘Branch of the Future’ concept, which has seen investments made into bringing the branch network into the 21stcentury with state-of-the-art technology designed to deliver a unique client experience to its personal and business banking clients. Things like Wi-Fi internet stations and iPads as well as video banking facilities and Intelligent Depositor ATMs have transformed branches into tech hubs that ultimately focus on a first class experience for the client.
“We need to constantly evaluate whether we think current technology is the right technology for the future and we also need to constantly look at how technology can better solve our customer’s problems. As technology becomes more evolved and digitisation of branches becomes more prevalent, we might find that these technologies do not have the value that they do today. It’s a constant challenge and a constant evaluation,” says Woolnough.
BRANCH OF THE FUTURE
One of the first branches to receive the ‘Branch of the Future’ treatment was Fox Street in Johannesburg’s Central Business District in October 2013 and the upgrade was met with praise from the community and from industry commentators who were particularly impressed with the welcoming environment as well as the technological tools on display. The protective glass interface has been phased out and bilock doors and security screens have been removed to encourage a one-on-one conversation with the teller and Nedbank hopes this will result in an open and welcoming atmosphere; the foundation for the building of enduring relationships with clients.
Nedbank has transformed a number of branches including notable locations in KZN (La Lucia Mall) and Gauteng (Hyde Park, Sandown and Meyerton). Locations for transformation have been selected carefully based on demand from a strong client base.
Meyerton is set to become an important strategic region of Sedibeng, owing to a fairly large business and residential corridor and vibrant agricultural holdings allowing for farming development. As a result of this, Nedbank believes its presence will go a long way in enabling greater financial inclusion while contributing towards economic growth and social development in the community and surrounding areas.
Along with the Branch of the Future concept, Nedbank is also working hard behind the scenes to ensure its physical footprint leaves less of a carbon footprint.
In October 2013, at its Lansdowne Corner branch in Cape Town, Nedbank unveiled Africa’s first ever banking branch that fully offsets its energy usage through renewable energy sources. The branch uses an innovative hybrid power installation, effectively making it a 100% off-the-grid outlet. The grid-tied renewable energy system harnesses solar and wind energy and converts this to standard mains electricity fed directly into the Nedbank branch.
According to the bank, this development will effectively help to lower South Africa’s total CO2-eqt emissions by approximately 71 tonnes per year.
“We believe that Nedbank Lansdowne Corner has set the standard for future ‘green’ banking branches in South Africa,” said Ciko Thomas, Managing Executive of Consumer Banking. “The off-grid hybrid installation offers proof of what can be achieved when organisations have a genuine vision for, and commitment to, contributing to a greener future for our country.”
This approach to powering its branch network will certainly be important as Nedbank looks to further roll-out its Branch of the Future concept as these locations are packed with high-tech digital equipment which does not sleep.
DIGITAL SECURITY
Of course, digitalisation has its difficulties and one major problem that has been faced by companies going online, all over the world, is cyber security – how to keep your online information safe. Cybercrime is a fast-growing area of crime. More and more criminals are exploiting the speed, convenience and anonymity of the internet to commit a diverse range of criminal activities that know no borders, either physical or virtual.
At this year’s Mimecast Human Firewall event in Fourways last month, Brigadier Nicolaas Theodorus Pieterse, section head of the Electronic Crime Unit within the Hawks spoke of the current difficulties that the authorities face when it comes to stopping cybercrime. He said that today, if you were to go to your local police station and report a robbery at your home you would get assistance but should you attempt to report that your online banking profile has been hacked, you’re less likely to get help. He stated that there is currently a drive to train law enforcement to deal more effectively with reports of cybercrime but it’s a lengthy process.
Woolnough agrees that more needs to be done but also understands the problem faced in recruiting specialists.
“There is always need for more investment into cybercrimes and cybersecurity and as much as we are closing gaps and finding ways to resolve issues, criminals are finding new ways to attack the banks and defraud our clients. There’s always need for more but there is certainly a lot of collaboration between the banking industry and the police force.
“Cyber security by nature is a specialised skill and we can’t expect the regular police officer to quickly become an expert,” he says. “There are forums in place which manage cyber security across all banks as it’s a common problem we’ll all have to solve so we’re in collaboration with the police force as well.”
Nedbank has invested significantly in online security and along with the Nedbank ID system that protects a customer’s internet banking details, the Approve-it system that was launched in 2012 is proving a huge success.
According to Nedbank, Approve-it gives you complete control over fraud and phishing attacks by allowing you to accept or reject any internet banking transaction by simply using your cellphone. When you perform a sensitive internet banking transaction, you will receive a message on your cellphone requesting you to authorise that transaction.
“We’ve seen a significant reduction in cybercrime as a result of using this technology,” says Woolnough.
“Approve-it is an exceptional identification tool. When you go online to take care of your normal transactions you won’t require approval but when you undertake a sensitive transaction you’ll have to go through an additional security step of receiving a SMS to your cell phone and approving or rejecting the transaction.”
Away from security, another digital investment that has proven to be hugely successful for Nedbank has been its new Market Edge tool. Released in July this year, Market Edge offers behavioural insights mined through big data on a web-based platform that provides customers’ spending patterns, income segmentation, gender and age demographics. Through Market Edge, businesses will be able to view consumers’ transaction histories and use this information to improve product development.
Nedbank claims that this tool helps merchants to understand the market as well as their customers.
“Market Edge comes from our business intelligence team,” explains Woolnough. “From a Nedbank perspective, we mine the data to understand various trends and insights around the point of sale transactional stream. In that context, we’ve developed a lot of IP around the point of sale spend and understanding location based services linked to transactional spend and the value that that would give to the bank to understand where customers are spending money and what they’re spending it on. This is info that our customers, the merchants, would really value.
“It helps us become a strategic partner, and aid in decision making processes, with our commercial clients. It gives them an overview of their markets and how they’re performing.
“The insights have been built up over many years and we will continue to build around the data we already have. The development of the tool was a relatively quick cycle and took just six months to get to market,” he says.
Market Edge is available to Nedbank’s card-accepting businesses and forms part of its focus on small, medium and large enterprises in SA.
“Market Edge uses Nedbank data streams so it’s very much a South African product. Some of the larger retailers have signed up and are currently going through pilots to see if they want to take up the product,” adds Woolnough.
All of these digital developments, alongside the investment into the marvellous branch network form part of a growth strategy that saw Nedbank retail business’ headline earnings increase from a loss of R27m in 2009 to R2.5bn and ROE from (0,2%) to 11,6% in 2013. Today, the company is looking to further increase its market share but right now the economic outlook is not necessarily conducive to large-scale business growth.
THE ECONOMIC CHALLENGE
The economy is slow and the Rand has seen significant difficulties over the past 18 months. Unemployment is high (currently around 25%) and Stats SA announced last month that economy contracted by 1.3% (seasonally adjusted and annualised) in the second quarter of 2015.
Figures like this cast doubt in the financial markets and, after the global recession of 2008, everyone is hoping that growth rates will improve.
Dennis Dykes, Nedbank’s Chief Economist tells Enterprise Africa about the unemployment figures saying: “It is a concern and it’s something we are collectively trying to address.
“Unemployment is high but it’s not getting worse, it’s stable at these levels. The alarming situation would be if we saw unemployment going up constantly – then it has different implications for the consumer of our products. We are very concerned because you want as much participation in the economy as possible; the more people in jobs, the more disposable income there is available and that means the economy is generally more able to withstand all sorts of shocks, to grow, and to improve. It’s also important from a financial point of view because you want more people participating so your domestic market is broader and you can sell more products into that market.
“It definitely affects us and we try different initiatives to address this in some way. Obviously it’s not a company responsibility but we do have projects around small businesses where we try to educate and assist small businesses in gaining finance and foster entrepreneurial spirit. There are also a lot of projects around education because one of the clear problems is that a very large portion of the unemployed is very unskilled and the more you can skill that population, the more likely they are to get jobs and become gainfully employed,” he says.
The economic climate is cyclical and constantly prone to change and this provides hope for businesses who operate in international markets and who are looking to the future for a more positive outlook. “We are going into a slower period of growth and it looks as though we are actually going to be under 1.5% growth but there’s nothing to say that won’t change and up until now it’s been relatively stable,” says Dykes.
But even with the promise that the economy is bound to change for the better at some point in the future, problems still remain that need attention. One such problem comes from China.
China is now the number-one trading partner for most African countries. It also has more than US$20bn in investments, in addition to development aid. That makes it a huge customer for African governments selling resources such as minerals and oil on the international market. If the worries around the Chinese stock markets continue, the currency could be devalued which could result in less demand for African goods from China – as they are priced in dollars that would make them more expensive for the Chinese. However unlikely this may be, it’s certainly something to keep an eye on as a slower economy is not good for any business including one the size of Nedbank.
“We’re not directly impacted but clearly we are indirectly impacted through effects on other emerging markets and the impact on commodity prices,” says Dykes. “It is definitely something that we watch closely. No one is seriously saying that the Chinese economy is going to fade away, it’s really a question of short term difficulties that you have to look through and expect China to come back strongly and that’s one of the reasons we are still enthusiastic about Africa as a whole.”
If the economy is to continue displaying poor growth rates, and if China is to continue showing signs of worry, perhaps growth in Africa could help spread the risk for many SA companies, including Nedbank. Although it has already made moves on the continent – owning subsidiaries and banks in Namibia, Swaziland, Malawi, Mozambique, Lesotho, Zimbabwe, as well as representative offices in Angola and Kenya and partnerships in West and Central Africa – Nedbank is still looking to grow in Africa.
“You have to look through the cycle and our long-term strategy will not change. There is a lot of interest in Africa,” explains Dykes.
“It has been a theme for South African businesses in general, especially retail, construction and banks, who have all been aggressive in Africa. Africa is also commodity dependent and commodities are going through a rough time. It’s not strictly the case for every economy; a country like Kenya is less reliant on commodity exports. There are clearly some dangers in moving into some areas that are going to have difficulties over the next few years. It’s been a remarkable success story; changes in economic policy have yielded good fruits but in the short term it’s not going to be a great diversifier because of the commodity story and the Chinese story. In the long term, Nedbank is extremely interested in Africa and would look through the short term difficulties for opportunities ahead,” he says.
Retief agrees that Africa holds important geographical markets for Nedbank but he says that the key is to understand the local requirements while further building the Nedbank brand.
“We want to make sure that as we grow in Africa, local people are running our banks. This all comes from building a brand that people admire and people want to work for,” he says. “While we are in this growth phase, that is one of the things we will focus on – how do we become Africa’s most admired bank? South Africa is just one country on this continent and as a South African business we need to work on becoming more inclusive with what it means to be African.
“From a Nedbank perspective, in the rest of Africa our brand still needs to grow. In the South African business we are admired for the things that we stand for as a business. A lot of the research that we’ve done; especially from an employee perspective, shows that graduates admire Nedbank because of the culture that we have which is highly people-centred, they admire the investments we make into people from a development and career growth perspective and these things truly attract newcomers to this bank.
“In the rest of Africa, our growth strategy has picked up in the last two years and there are definitely plans for the next five years so the brand will definitely grow,” explains Retief.
BRAND STRENGTH
The determination to continue growing in Africa is typical of this ambitious organisation and demonstrates a drive that has made the bank one of the most respected and well-recognised around. Over the years, the group has cemented its position among the front runners in the financial industry and is now universally known as one of the top four financial institutions in South Africa.
Nedbank’s brand strength was exhibited recently when Brand Finance Africa released its annual report on South Africa’s 50 most valuable brands. Nedbank came in at number seven, despite the challenging economic climate, and continues to boost the nation’s image as an investment location. “The Top 50 Most Valuable Brands once again highlights the incredible potential within South Africa’s great home-grown, world-class, brands,” said Brand Finance Africa MD, Ollie Schmitz.
Brand South Africa CEO, Kingsley Makhubela highlighted the importance of the work done by these major brands saying: “Your excellence in the corporate field contributes immensely to the strength and positive reputation of the South African nation brand.
“Your product quality, customer service and ethical framework contribute to perceptions about our spirit of Ubuntu, our innovation, and the values that drive South Africa. South Africa’s corporate sector is therefore critical to enabling Brand South Africa to position the country as an attractive inward destination of choice.”
As Nedbank continues on its journey towards becoming Africa’s most admired bank, investing in both its physical and digital assets, it looks certain that there will be no holding back when it comes to delivering first class customer service. The online services for individuals and for businesses, and the branch network that welcomes all clients big or small, are all vehicles for success for this business that is built to make good things happen.