RISK MANAGEMENT | 06 JULY 2021

Transactional Trends

Absa-CIB-Author

Ellen Kumwenda Mtine

Head Cash Management, Transactional
Banking, Africa (ex. S.A.)

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The World Changed (faster)…

It has been said that 2020 was a year of survival and 2021 will arguably be the inflection point that presents pathways out of the pandemic. Distinct patterns & relationships have emerged and will continue to shift - across organisations, businesses, regulators, consumers and society. Green shoots have already presented themselves and the future players have not only capitalized on this but have already organized themselves to capture post pandemic opportunities, and some are already seeing a clear step change in growth.

Following the pandemic, distinct trends dominated and will very likely continue to embed themselves into consumer transactional preferences and key client needs.

1. Efficient liquidity management is (still) a core priority

Maintaining strong liquidity positions, whilst seeking optimisation remains foremost in Treasurer’s minds.  In addition, the quest to shorten accounts receivable whilst extending accounts payable through dynamic liquidity tools that provide the ability to produce forecasting, predictability, and previously unmodelled stress tests have been important but not at the expense of unsettling already unstable supply chain predictability.

Banks have seen an increase in client willingness to test new technologies that provide control and enable deeper understanding of business risks. Human-in-the-loop approaches with machine learning to build solutions that, for example, improve cash flow forecasting ability have been key for corporates, as well as spending time improving internal knowledge management systems for better visibility.

2. The lasting effect of Digitisation has been embraced

Payments, specifically, have continued to evolve. Payments experiences across Africa are varied, innovative and seamless at best, clunky and slow at worst. The sector sits at various stages of digitisation, disruption, demonetisation, dematerialisation and democratisation. Creating meaningful client experiences requires striking the right balance between what is possible, innovative and solves a real problem.

Alternative payment solutions enabled by banks, technology companies, payments aggregators and mobile network operators delivered through a combination of existing and new solutions and prototypes (some conceived, built, tested, and deployed quite rapidly during the pandemic) have monumentally accelerated digital adoption, in some instances upending long entrenched transactional behaviour altogether.

Regulation has also been a key catalyst to this. For example, Statutory bodies across Africa have demanded e-commerce alternatives as well as API based verified payments solutions to improve tax compliance and broaden the range of payment options. During the pandemic specifically, regulators across Africa increased mobile money transacting limits and removed or capped transaction fees, lowering the cost to serve and facilitating the progress towards frictionless payments in several countries.

In addition, Cryptocurrencies can no longer be ignored – Central Banks are already pursuing Central Bank Digital Currency (CBDC) initiatives. Fiat to crypto (& vice-versa) products will become more topical and will continue to enjoy more mainstream discussions.

Partnerships are still important

All payments providers and partners need to work towards achieving relevant and scalable interoperability as far as possible whilst leveraging existing channels that work.

This will continue to lead all players (banks, technology companies, payments aggregators, mobile network operators) to find relevant partners with meaningful connections across mobile money, collections, statutory payment, merchant acquiring and cross border payment propositions. A wave of solution providers is sweeping through the continent with very real and scalable ideas at an infinitely faster rate of change than previously experienced, and end to end digital solutions, which facilitate enriched multi-client category and multi-sector ecosystems, will be possible by those that successfully leverage different infrastructure resources.

Risks, specifically Cyber risks, are on the up

With a surge in digital transactions, trust and security have moved to the fore. Increased visibility and scrutiny of transactions coupled with the ever-growing need for real time transactions will be key.

Given the pivotal role of the financial sector in economic stability, banks as trusted custodians of depositor’s funds must continue to invest in infrastructure that provides security, including closer scrutiny of potential risks that may be introduced by partners. While technology that enables transaction speed and visibility is important, security is paramount and a single security breach can destroy confidence in new innovations, and cost much more in financial losses.

Absa embarked on a significant channel delivery programme, the results of which have been evident in the last year

Our focus has been to build both integrated and online client channels that are not only relevant & intuitive, but also enhance the client experience and provide robust security.

In our channel journey we have relied heavily on client co-creation and feedback, which has been invaluable. Our focus on client experience has been tested and evidenced in our speed to onboarding on our host proposition, shortening the time significantly from previous time to transact measures. This has been possible due to a shift in our client engagement models with a focus on deeply understanding client needs at inception, as well as in-house channel build expertise to solution real-time.

Through the delivery of API enabled statutory propositions and mobile propositions encompassing disbursement and integration with MNO’s for float management on our online channels, we have facilitated greater tax compliance and supported the market drive towards cashless solutions that reflect underlying consumer needs.

In addition, our transactional banking solutions have been recognised industry-wide. From our evolving Covid-19 response, where our initial focus was on putting our employees and clients first, which was evidenced by our Euromoney Award for Excellence in Leadership, to our ongoing focus on providing clients with access to capture new growth opportunities enabled by meaningful liquidity, trade finance and working capital support. Through our knowledge of various client sectors, we have built a comprehensive understanding of end-to-end solutions, providing relevant client needs underpinned and delivered through digital channels. Our cash management awards and industry recognition are a testament to this.

Our focus remains on capitalising opportunities in the transactional business and the trends that continue to emerge. We see macro priorities in these key areas;

  1. Digitisation of customer journeys, end to end - Investment to increase (fast track) the adoption of relevant technology across all areas of the business through AI, Machine Learning, Deep Learning, Robotics, will continue to grow. This should look to solve for process automation and optimisation, increased fraud detection, enhanced customer service, biometric client identification, seamless client onboarding and self-servicing. Enhancing non-repudiation and providing immutable transaction history for payments is critical.
  2. The African Continental Free Trade Agreement (AFCFTA) will lead to an exponential increase in intra-Africa trade but we need transparent, efficient, real – time payments and other enhanced digital capabilities to underpin and facilitate this trade, this may be across various channels and infrastructure.

We believe that Absa is well on its way to fulfilling its mandate of being a truly digitally led Pan-African operator and we look forward to engaging with innovators across the continent.

Absa-CIB-Author
Ellen Kumwenda Mtine

Head Cash Management, Transactional Banking, Africa (ex. S.A.)

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