Future of e-Banking in Southern Africa | Ideas and Markets | IAN NDLOVU

There have been break-neck changes in technology in Southern Africa catalysed by the internet revolution over the past two decades. The adoption of internet technologies as a result of globalization has led to seismic shifts in the banking industry in general and the availing of banking products in particular. Over the past 15 years the Southern African region has witnessed tremendous growth in internet connectivity and electronic banking solutions. South Africa, the regional economic powerhouse, has been at the fore-front of changes in financial services provision underpinned by ever changing e-banking, e-insurance and e-trading in money and capital markets.

 The advent of e-banking services has raised a number of key issues. First industry experts have been debating whether e-banking is a threat to the brick and mortar model of banking which has been operational for decades and in some economies for more than a century. Some thinkers in the nascent field of e-finance provision have asserted that e-banking goes beyond merely substituting the traditional approach to banking in that e-finance is actually transformative. There are few scholars who aver that e-finance or e-banking is actually disruptive to the general fabric of banking and economic activity at large.

 It is worth observing that research on e-banking is still at the early stages since the adoption of e-banking solutions is a recent phenomenon, hence empirical literature on this vital subject is sparse. The gap in literature and scholarly debate on the potential of e-banking has been bridged by industry experts. The plus of this approach to bridging the knowledge gap has been that much of the information which exists in the public domain at present is from an inside perspective as opposed to the academic’s bird eye view, an external view indeed. It is imperative to note that over the past 10 years academic interest in e-banking has been growing steadily.

 In much of Southern Africa the e-banking revolution began in the early 1990s with the introduction of Automated Teller Machines (ATMs) and Point of Sale (EFTPOS) facilities. In Zimbabwe the e-banking revolution was pioneered by foreign owned financial institutions such as Standard Chartered Bank, Barclays Bank and the Central Africa Building Society (CABS) which is part of the Old Mutual family of financial institutions. It was CABS which spearheaded an interbank and inter-shop interface technology called ZIMSWITCH which enabled clients of certain banks to withdraw money from ATMs of participating banks at lower Baumol-Tobin money demand costs to the client in terms of trips to one’s bank.

Much of the growth in e-financial services provision in Southern Africa has been fostered by South African financial institutions such as Standard Bank, Nedbank, First National Bank (FNB), First Rand Bank and Absa bank to name a few. These South African institutions have been at the forefront of adoption of e-banking solutions which have changed the landscape of banking in most of Southern Africa. This trend raises key questions which are; have these institutions adopted these e-solutions as a survival mechanism? Are these institutions going to survive the e-financial services changes that they have helped introduce? What has been the contribution of e-finance to overall financial sector growth and economic activity? Lastly, has e-finance really promoted financial inclusion, that is, the bringing into mainstream financial economic activities of the unbanked segments of the populations of Sothern African economies?

 The questions raised in the foregoing analysis will be addressed in future articles and it is the aim of this column to spark lively debate on key ideas and issues associated with e-finance in Southern Africa.