NEW entrants in the financial services sector are attracting companies to consider joint ventures with the technology start-ups to stay competitive, while they also compete globally to retain their top people.
Nearly half of insurance CEOs and 40% of bank heads globally plan to enter into joint ventures in the next year to attract new clients and access new technology, according to PwC’s report on African financial services released on Monday.
This trend is considered particularly pertinent to financial services in Africa, where mobile phone use is growing strongly.
"More than a third of CEOs are planning to enter into joint ventures and strategic alliances over the next 12 months, and I think we are going to see a lot more of that in Africa, particularly with mobile phone operators," said Johannes Grosskopf, PwC banking and capital markets leader for Africa.
For example, M-Pesa, which allows customers to use cellphones to withdraw and deposit cash and to pay electricity bills and taxi fares, has more than 19-million customers in Kenya.
According to Gallup, nearly two-thirds of households in 23 sub-Saharan African countries had at least one mobile phone in 2013 and the region is the fastest-growing mobile technology market in the world.
However, Victor Muguto, long-term insurance leader for PwC Africa, said alliances with technology start-ups should be considered an interim measure.
"The Kodak story has huge application to financial services, as if insurers and banks that don’t innovate they will become irrelevant, but this joining up with other nontraditional operators is an interim solution."
Instead, financial services players needed to find new ways of doing business, including how they organised their distribution platforms and developed new products, he said.
According to Peter Schlebusch, CEO of Standard Bank’s personal and business banking division, the greatest competition facing banks was not from rival financial institutions.
"Now it is from technology companies and increasingly innovative online retailers that are leveraging the power of smart devices to provide instantly available, user-friendly financial services to customers," Mr Schlebusch wrote in Business Times on Sunday.
The heads of financial services companies are also concerned about finding skilled people and the reams of regulation they have to comply with, according to PwC’s African report. The report is based on interviews with 410 CEOs in the sector, including those from banks, capital markets, insurers and asset managers.
Mr Muguto said last week’s announcement that Bruce Hemphill would replace Julian Roberts as CEO of Old Mutual showed how SA had to compete globally for the best people. Mr Hemphill was head of wealth, insurance and nonbank financial services at Standard Bank Group and was previously CEO of Liberty, SA’s third-largest insurer.
"To me Bruce Hemphill is a good example of what can happen to a good resource," said Mr Muguto. He expected the competition for top people to intensify because there was already a scarcity of skills in Africa.
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