What entrepreneurs can learn from South Africa’s Banking Industry
The banking industry has existed for centuries with one of the oldest (still existing) banks in South Africa, FNB, having opened its doors in 1838. Throughout the years, competition in the industry has been tight and only amongst a handful of banks. Of late, this industry has experienced unprecedented changes with competition joining the table, not only from traditional banking institutions but also non-banking entities such as Google-pay, Pay-pal and the likes.
Banks are faced with the task of remaining relevant and providing customers with new and innovative products that stand out. With newcomers entering the market, traditional banks are squeezed into behaving a little less traditionally and entering into uncharted avenues in order to remain on top and continue to create long-term value for customers and shareholders.
In the midst of this chaotic environment characterised by uncertainty, economic and political instability and unsurpassed competition, what can entrepreneurs learn from both the old and the newcomers of this industry?
Have you noticed just how much FNB brags about what they can do for you? FNB has managed to present itself and consequently be perceived as a very innovative bank, probably the most vibrant, innovative Bank in SA. Reality is, other Banks are also creating new technologies and services. Some are pioneered by other Banks and yet, from the public eye, these innovations may be credited to FNB because FNB talks.
You may be providing the same service as your competitors and they may even be ahead of you in many aspects, but you can still pick one characteristic that will be most advantageous and valuable to customers and make it your “stand-out” point. Then back it up with vigorous action and continuous improvement. You may be good….no, wait…. great at what you do, but if nobody knows about it, then it’s not going to work for your business. You not only need to know what you are offering and why, but find the most effective way to communicate that and you will be bridging the gap between production and sales.
Target Market Focus
Capitec, from its onset has been focused on low to middle class income earners to gain traction in the industry. Their approach was low fees coupled with simple banking, which was evident in their pricing strategy; 1 account offering – savings/transactional account and unsecured lending offering. In doing so, they attracted a large market who felt could understand how and why the bank charges them and of course, the low banking fees. By so doing, Capitec grew so fast that many critics’ expectations were (and still are) that it will crash. Without going into debate about that, the focus here is how Capitec’s keen eye on a specific target market enabled it to dominate that market in a relatively short space of time. When Capitec was listed on the JSE in 2002, its share price was at R2.75 and has reached lows of R0.80. At the time of writing this article (August 2019), Capitec’s share was worth R1099.34! In other words, if you had purchased 100 shares in 2002 at R2.75 you would have spent R275 (excluding fees), sat back and relaxed, while your investment would now be worth approximately R109 000!
Focus is key. How well do you know your market? What are their needs, problems, struggles? What can you present to them that no one else is offering, or better yet, how can you offer it best? The knowledge and focus on your target market might be the holy grail of your business.
The new kid on the block is causing waves with its business model in the banking space. Tymebank offers banking services through Pick n’ Pay and Boxer stores. This is not an entirely new concept as other Banks have been utilising supermarkets’ kiosks to fulfil services such as withdrawals. Tymebank, however, took it up a notch and Pick n’ Pay does not only fulfil withdrawals, but opening of the Bank account, deposits and maybe soon, the lending market will be accessed through the same channel as well.
Dubbed a digital bank, what Tymebank has achieved is, it has tapped into its partner’s market, distribution channel, personnel, infrastructure and data (through the smart-shopper loyalty programme). This means Tymebank does not have huge rental costs due to brick and mortar branches and ATMs, saves on employee salaries, does not need to create distribution channels and has accessed to data that has been mined over time.
Like any other business model, this one does pose its unique set of challenges as well. Some include: Will the supermarket be able to carry large amounts of cash to satisfy customer withdrawal needs during peak periods considering the risks involved?
This model offers Pick n’ Pay group an opportunity to not only be a supermarket but in some way, a financial institution as well – a trend non-traditional financial institutions are flexing towards.
Nevertheless, our take-home lesson here is: You do not have to have it all to create a meaningful and relevant business. Businesses already exist that you can strategically partner with and create synergies that benefit your business, your partner’s business and your common customers. Develop an eye for opportunities that identifies gold mines in the least appealing forms. Even your competitors can be your partners in some aspects.
Lessons are found everywhere. Pick one if these that you believe will be most beneficial to your business now, commit to it and grow. Happy Businessing.
– Amanda Baloyi