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Cape Town - Despite the growing hype around financial technology and the wave of new and innovative payment solutions, many South African businesses remain beholden to the major banks, according to Andries Kok, chief financial officer of PayAccSys, a cloud-based electronic funds transfer platform.
While in theory, these businesses grasp the potential benefits of embracing non-traditional banking and financial services, several myths prevail, in his view, that inhibit their openness to new providers.
Kok provides the following insights:
The security conundrum
Data security is undoubtedly a persisting concern, and there is a perception that traditional banks are far more secure than their non-traditional and smaller rivals. In fact, the opposite is often times closer to the truth.
The major banks very seldom develop new, more secure technology or introduce the latest security offerings – indeed, these banks buy the same available technology as their non-traditional rivals. And being less hampered by bureaucracy and legacy systems, smaller and alternative banking providers often introduce more secure systems before the major banks.
For instance, some local banks use 128bit encryption SSL keys to secure the connection for their online banking site, while several smaller providers use far stronger 256bit encryption keys to secure their connection.
Humans vs machines
Another stubborn myth that prevails is that traditional banks are able to provide more efficient customer service – and being large and established, have a better view of transaction histories than their smaller rivals.
Again, the opposite could be true. Working with small and alternative banking providers, one is automatically working with people – as opposed to large call centres or mechanised response systems.
The sticky issue of costs
As with any business function, cost is always a bugbear, and businesses tend to assume that large banks are more competitive on price than non-traditional providers. Yet precisely because of their size, big banks are usually far more expensive than alternative banks.
Smaller, non-traditional providers do not have these costs to bear – and because they often specialise in one niche area of banking (facilitating EFTs, for example), they can provide essential services at far lower fees.
A global shift
"Admittedly, the traditional banks still benefit from several inherent competitive benefits. They have large and established customer bases, vast amounts of customer and transaction data and capabilities to enable payments, security, and financing - all of which are difficult to reproduce for new and smaller entrants," added Kok.
"Without doubt, however, they are steadily losing market share to more agile and innovative non-traditional banking providers. According to Accenture’s Global Consumer Pulse Research, non-traditional competitors are gaining ground with banking consumers."
The report revealed that 44% of consumers across industries globally say they would consider products and services from companies that are not generally considered part of traditional industry definitions, and 43% would be open to products or services not just from companies - but also from other consumers.
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