PwC global leader of financial services and partner Nigel Vooght said customer-centricity was not about giving a mortgage as a product but understanding clients' aspirations and advising them accordingly. A customer-centric bank would not just give a personal loan, but would go as far as advising a client if it was the right product to use.
"Centricity is really understanding what your customer's needs are," Vooght said. "The winners for the future are the ones who really understand their customers. Financial institutions that get that right will win."
In South Africa, although banks had been moving towards understanding customers' needs, wealth management had been predominantly a service for the upper-class.
Only a few banks advanced loans to customers and advised them on how to use the cash to build wealth.
Vooght said the challenge with customer-centricity lay in how bankers were rewarded for long-term gains. The challenge was that a customer served well by a relationship manager might not "buy" something from a bank for a few years.
One had to ask if the lending was helping the country and if its people invested for the future. If not, then there was a problem.
Vooght said if lending was directed at consumption and just keeping customers liquid, there was a risk of a bubble in the future. The National Credit Regulator recently commissioned research on the spike in unsecured lending in South Africa.
PwC notes in its report that the regulator has warned that rather than posing a financial systemic risk, there is a danger of customers being over-indebted. This was particularly the case if the loans were being used for consumption.
The latest National Credit Regulator data showed that unsecured credit's share of capital was R21.95bn for the quarter ended March. This represents an increase of 31% compared with the first quarter last year.
But the biggest players in unsecured lending, Capitec and African Bank, have been pulling back in what may be a sign that certain areas of the market are starting to feel the pressure.
Banking and capital markets leader for PwC Southern Africa Johannes Grosskopf said local banks needed to focus on enhancing efficiencies to drive growth. This included investing in technology and infrastructure that could help drive down costs of delivering services while enhancing the customer experience.
PwC further noted in its report that the leading local banks had healthy cost-to-income ratios. It claims that while more efficiencies could be realised they would be difficult to achieve.
Source: Business Day via I-Net Bridge
