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The radical digital transformation of the financial services sector has severely affected the most vulnerable in our society.

More than 19-million people in SA are still offline, meaning almost 32% of our population depends on cash and has limited access to banks.

Sweeping changes have affected people’s lives and livelihoods since the turn of the decade due to a shifting business landscape.

SA’s four major banks — Absa, FNB, Nedbank and Standard Bank — closed almost 700 branches during this decade and expanded their digital services to keep up with fintech companies competing for their customer base.

Standard Bank closed 104 branches, making its network the smallest among the four traditional players.

Absa, which had significantly more branches than any of its rivals, trimmed them to a similar number as Standard Bank’s.

FNB aggressively decreased the number of its outlets and

Nedbank started cutting in 2014 when its network peaked.

Hundreds of staff members were retrenched as part of their efforts to digitise.

In 2020, the Covid-19 pandemic sparked further digital transformation, and in 2021 the destruction of the looting and rioting caused further branches and ATMs to close. All four of the traditional banks closed branches in KwaZulu-Natal and Gauteng as a result.

The destruction of branches and ATMs hampered the ability of South Africans to draw salaries, pay for daily needs, and businesses to operate and pay their staff and suppliers.

It also had a devastating impact on Sassa beneficiaries.

Businesses were vandalised and burnt down, prompting President Cyril Ramaphosa to deploy the army to affected areas.

Our business landscape has, however, been shifting even before the onset of the pandemic and its subsequent digital transformation — especially for financial services.

For years, fintechs have been chipping away the customer base of established players.

Now, the traditional banks have responded by embracing the same approach to technology and innovation that enabled their digital counterparts to flourish. But at what cost?

While digital transformation helped banks to keep up with the evolving needs of many consumers, it also left the most vulnerable behind.

The rate at which branches continue to close is a concern.

If the reduction trend continues, bank branches could be extinct by 2034.

This has severe implications for people who depend on cash — widening the digital divide.

To ensure access for those who need it, the banks require a delicate balancing act between digital transformation and physical branch preservation.

Banks also cannot exclusively look at consumers through a city lens as not only the most vulnerable in society are being affected. The concentration of banks in large urban areas has always been contentious for consumers living in peripheral regions.

This economic and social exclusion have made their lives and livelihoods more challenging.

From a reputation perspective branch closures are regarded as the third most important factor in the eyes of the consumer, after financial sustainability and personal data protection.

The challenge is, should businesses resist technological progress? The downside of not changing will mean a decline in competitiveness and the capacity to fulfil its economic and social purpose.

When new technology is resisted, it becomes a pragmatic necessity to provide opportunities for those who fear losing their livelihoods.

Is it possible to stay relevant if one does not digitise?

The skills challenge is another problem in SA. Businesses can do almost nothing about labour market structure, transport costs or migration regulations.

Africa is nowhere near ready to make a just and inclusive transition through the fourth Industrial Revolution. We need a capable state, and a strong and vigilant society, to be able to do that.

The trend for bank evolution is clear — the focus is on digital as top priority. Yet the physical bank branch continues to play an important role.

As a point of access to cash and value-added services for both individuals and companies, the bank branch reinforces its relevance in a consulting and sales space.

Banks should carefully consider the impact of closing branches and ATMs on consumers. Their should always be at the centre of the decisionmaking process.

Before closing a branch or ATM, banks should conduct a robust needs analysis of the financial consumers using that facility.

Despite the continuing migration to mobile banking and the looming presence of challenger banks offering eye-catching services, many consumers still prefer face-to-face communication in bank branches.

The challenge will be to focus on renewing the digital offer while enhancing the strengths of the branch — making the consumer the centre of the bank’s innovative strategies.

This article appeared in The Herald (South Africa) on 26 August 2022 written by Professor Madele Tait of Nelson Mandela University’s Faculty of Business and Economic Sciences.

Contact information
Professor Madele Tait
Professor in Marketing Management