Absa: HSBC will turn up the heat

Johannesburg – Should its takeover of Nedbank Group [JSE:NED] succeed, HSBC’s global know-how will turn up the heat for local banks, the head of retail banking at Absa Group [JSE:ASA] admits.

Gavin Opperman told Fin24.com he was wary of the international skills and technology which HSBC would bring to the table.

But while he thinks the takeover will increase competition in retail banking, HSBC’s real impact may be felt in the business and investment banking market.

"We encourage competition and Nedbank has always been a competitor for us," he said.

Opperman expects technology will be the key driver of change in retail banking in coming years.
 
He pointed out that competitors were now making more use of consumer retail stores to draw cash at far lower costs than with an ATM or bank teller.
 
"When it comes to banking we now need to focus a lot on customer service and not just products," he said.
 
Two areas which are proving a headache for Opperman are the implementation of Financial Intelligence Centre Act (Fica) and the debt counselling process.
 
While he sees the benefits of Fica, Opperman said it has increased banking costs and has discouraged consumers to shop around for the best products on offer because of the bureaucratic effort involved in switching.

He pointed out that the process becomes onerous because of the number of banking-related products consumers now have - including insurance, assurance, credit cards, investments and savings products.
 
As more consumers use internet and cellphones to interact with financial services providers, Fica compliance gets increasingly complicated.
 
This view is shared by Mike Brown, managing director of online investment platform etfSA, who recently told Fin24.com: "The matching of the sometimes seemingly Victorian administration systems and processes to the cyberspace of web-based investment platforms is a challenge faced by many of us in the financial services industry."
 
Distressed customers

Opperman also expressed concern about the number of people who had applied for debt counselling in South Africa and the bottlenecks in the process.
 
"At Absa we have about 82 000 people undergoing debt counselling (with debts that) amount to around R9.6bn, but while the court process is slow there are some encouraging initiatives being taken by the regulator and the banking sector," he said.
 
He added that Absa was keeping a close eye on the build-up of distressed customers.
 
Key areas of concern for him remained high unemployment and poor saving levels, and the short-term impact of the public service strikes.

Opperman expects the operating environment for retail banking to become far more volatile, with shareholders and customers likely to experience more boom and bust-type cycles.
 
"We need a more robust and adaptable model," he said.
 
- Fin24.com