How Digital Are Incumbent Banks? A Personal View From The Highveld And The Low Country


What progress are banks making in providing a truly digital customer experience? How are they transforming their operating models to tap into the efficiency opportunities?

To answer these questions, we scanned banks across several countries on objective, externally observable criteria. I have recently lived for extended periods in both South Africa and the Netherlands, and banking in both countries has some interesting similarities as well as differences, and this blog highlights and compares banks in these markets.

Our main observations:

  1. In both countries, banks have made good progress on making existing banking products and services available on digital channels, on improving their richness over time, and on optimizing the user experience for digital channels – with South African banks somewhat ahead of the Dutch banks
  1. However, South African banks are much ahead when it comes to allowing new or existing customers to originate products online
  1. Few banks in either country seem to be harnessing digital as a means to generate new revenue streams by providing customers with new products and services suited to the digital environment or by personalizing existing products and services

Measuring digital progress empirically

Digital transformation is a top strategic priority for banks globally, driven by the increased prevalence and adoption of digital channels such as mobile and social and the ensuing changes in customer behavior and expectations. For banks, these changes broadly present two opportunities – lower costs in distribution by moving routine transactions to digital channels, and generating new revenue streams by introducing new products and services to cater to the changes in customer behavior and their expectations and requirements.

In order to assess to what extent banks have been able to achieve this transformation, we listed 15 criteria which can be observed externally where it matters – at customer touch-points. We categorized these into five categories:

  1. Availability of banking services on digital channels
  1. Richness of banking services on digital channels
  1. Optimization for a multi-channel experience
  1. Banking products and services adapted for digital
  1. Harnessing digital for personalization & revenue growth

We evaluated a slew of individual banks across Europe, Middle East, and Africa on these criteria.

Digital transformation

I’ve worked extensively with local banks in South Africa and the Netherlands. Since I have a good understanding of the products and services that they offer, I was interested in comparing and sharing the results for banks in these countries.

On the surface, South Africa is a developing country with comparatively lower Internet penetration and bandwidth; however the share of the population of South Africa who access full banking services are highly urbanized and highly connected. Like the Netherlands, the South African bank sector is also highly concentrated, with four main players of roughly similar size, including Nedbank, whose name still refers back to its Dutch origins.

However the South African banks, despite significantly higher interest margins, earn a much larger share of their operational income (~30%) from fees and commissions, compared to around 15% at Dutch banks. With interest rates and margins likely to be squeezed for some time to come, it was interesting to see whether Dutch banks were using digital to boost non-interest revenues.

How they stack up

In the above five categories, banks have made most progress on the first three, i.e., making banking services available on digital channels, improving their richness over time, and optimizing the user experience they provide on each channel. However, most banks in our study lag in adapting their products and services for digital channels or providing new digital products and services. Further, very few banks in this set seem to harness customer data to enrich customers’ experience, anticipate customers’ needs, or personalize their offerings.

The following table summarizes these results; capability scores are on a scale of 1 to 5 (1=low maturity, 5=high maturity). While we performed this analysis for banks individually, we have summarized and represented these results below on a country basis. Note that these results reflect a snapshot at a particular point in time – banks are constantly investing and evolving their capabilities in these areas, and hence this view is very likely to evolve with time.

digital banking, e banking, South Africa, Netherlands

Some novel practices

In comparing the Dutch and South African banks, we observed some novel practices.

Standard Bank in South Africa allows visitors to register via its Internet banking portal or mobile app without needing to have an existing account. All other banks that I have experienced require a customer to have an existing account before opening a new one. This potentially provides Standard Bank the opportunity to leverage the customer’s digital behavior to offer relevant products and services and enable customers to register their interest in any current or upcoming products and services.

Knab, a Dutch challenger bank setup by Aegon, operates entirely online and has no branches. Compared to other banks, which require one or more final steps to be completed in the branch, Knab only requires applicants to provide details of an existing bank account and a Dutch ID to open a new account. In a mature and saturated market like the Netherlands (where most eligible persons are likely to have an account), this is an interesting practice, which probably allows the bank to simplify the “know your customer” processes by trading off the small segment of customers who do not have any existing accounts.

Dig deeper on how to create moments that matter to your customers. See Live Business: Live Customer Experiences for the Digital Economy.


About Manohar

Manohar is Industry Director of the Banking Industry Unit at SAP in the Netherlands. He works with financial services institutions to help them think strategically about how to use technology to optimize and transform their business, and generate value. Manohar blends business and technology skills to identify which technology investments will enable the most business value and support growth and innovation and to communicate these choices effectively to executive stakeholders.