It’s no secret that the financial services sector is the biggest
spender on ICT in the country. According to BMI-T’s SA ICT Vertical
Market Sizing and Forecasting Report, the financial, business and other
services sector accounted for over 30 percent of total expenditure on
information and communications technology in South Africa. But what
trends are dominating the sector?
Because of security, financial institutions, especially banks, cannot
feasibly outsource their IT departments, a trend seen in most other
sectors. Most functions are retained in-house. However, desktop support
is one area where outsourced solutions make economic sense. Gijima AST,
one local company focused on the financial services sector, offers
customer interface as well as electronic payment solutions. Electronic
payment (largely back office) solutions are seeing tougher security as
well as further automation of processes. The trend is for cheques and
other documents to be scanned and archived for simple access from
anywhere on the bank’s network.
Making this kind of data available on other platforms is also seeing
serious adoption in the industry. Clients can, for example, access
scanned cheques/ deposit slips/documents via the traditional online
banking platform. The broader push sees transaction systems leveraged
onto different platforms and interfaces. In the same way that an
archived image of a cheque can be accessed in-branch and over the
internet banking interface, banks are taking their core transaction
functionality and leveraging that over a number of platforms.
No longer are ATMs simply cash withdrawal points. Transactions can
now be done inbranch, online through internet banking, via ATMs, through
point-of-sale systems and, increasingly, on mobile phones. Gijima says
the “focus is shifting towards solution concepts for new delivery
channels such as electronic banking and new branch structures”.
Mobile Banking
This leveraging requires significant integration of new systems with
the banks’ core legacy offerings.
The biggest push in the South African
market is undoubtedly into mobile banking. FNB, one of the pioneers, set
up a division internally that innovated mobile banking. This now falls
under the ambit of FNB Mobile and Transact Solutions, and the group has
set up a similar team responsible for innovation, with some of the
original mobile banking staff involved.
It’s not only FNB that has realised that smaller, more autonomous
units are the key to innovation.
This new team is largely responsible
for the ancillary FNB Connect service, where FNB is leveraging its
excess bandwidth and providing connectivity and VOIP calling to its
customers. The use of two-way SMS messaging in the customer relationship
management realm has caught on in the South African market, and banks
have here again married newer platforms with their legacy systems.
Internet banking systems have been further integrated with SMS
gateways as a fraud prevention mechanism. Account transaction
notifications are sent in real-time, allowing customers to be aware of
payments immediately.
Aside from sector-specific adoption, the financial services industry
is adopting broader ICT trends, such as virtualisation, standardisation
and – as mentioned – the outsourcing of desktop support. Standard Bank,
for example, in 2008 standardised its IT environment to create a
centrally managed one.
The benefits were obvious: costs were reduced, while the bank saw
increases in security, productivity, agility, and stability. It’s also
used the built-in virtualisation technology in Windows Server 2008 to
reduce the number of physical servers required to run bank operations.
This also translates into quicker development of new services.
Cross-Continent
Less than ten percent of Africans use banking services, however. In
addition, cash is still the primary financial instrument, and market
capitalisation as a percentage of gross domestic product (GDP) is well
below 100 percent. These statistics illustrate that financial markets in
Africa only contribute in a minor way to economic growth on the
continent. However, initiatives like the M-PESA mobile payment system in
Kenya show the potential opportunity for ICT in fi nancial services. It
is also ICT providers across the globe that are increasingly providing
these services, either instead of or in partnership with banks.
There is another success story in Ethiopia – Ethiopia Commodity
Exchange (ECX). Solomon Edossa, CIO of ECX, says it is designed after
world-class commodities exchanges like the Chicago Mercantile Exchange.
Generally, a commodities exchange would partner with financial
institutions to handle settlement of trades, but there was no
clearinghouse and no electronic payment system in Ethiopia. ECX
established its own clearinghouse and electronic payment system, in
partnership with Ethiopian banks, to handle its transactions.
In fact, ECX has become a financial services “orchestrator” in its
ecosystem, which can extend to several hundreds of thousands of
subsistence farmers in cooperatives participating as ECX members.
Its commodity warehouses can be considered “bank branches”. Producers
deposit commodities at the warehouses. ECX assures the quality,
quantity and delivery of each commodity to buyers. At the same time, ECX
assures sellers their commodities are secure and payments are received
within 24 hours. In 2010, producers will be able to get warehouse
receipting financing on commodities they deposited. ICT abounds in ECX’s
“financial market”.
Edossa says once commodities are deposited into a warehouse, they are
electronically registered and tracked. This information is
electronically communicated to the ECX headquarters in Addis Ababa. In
addition, prices are displayed across the country at remote stations and
on mobiles. Soon, ECX will begin online trading.
But the ECX story is really about the potential of its ecosystem.
Edossa states: “All my staff members are local. We are creating jobs and
increasing local capacity.”
In working with banks to deliver on their service delivery agreements
with members, ECX is helping banks design new financial products for
members. This brings more business to the banks. In addition, the
process is also encouraging Ethiopian partner banks to implement core
banking processes, which is creating new opportunities for ICT
providers. Eventually, ECX will implement ICT-dependent services in
sectors other than financial services like logistics, systems support
and internet cafes.
But ECX still faces the typical challenges in Africa. In fact, Edossa
admits: “I doubted it could be done.” ECX had to address the regular
power outages in Ethiopia, particularly in the rainy season, and the
unreliable communications network. It met the challenges with a variety
of solutions like mixing generators and uninterrupted power supplies to
keep systems running, and mixing broadband and dial-up for
telecommunications consistency. ECX worked the ICT challenge so well
that there is not a single failed transaction in two years of operation
and close to $2 billion in transactions.
