The South African banking group Nedbank invested R3.5 billion (about $248 million) to foster the digitalization of its services in the first half of 2019. According to the rating agency Moody’s, this represents around 22.4% of operating expenses over the period, roughly the same amount as that of rivals Absa Group, FirstRand Bank and Standard Bank.

Moody’s says traditional banks like Nedbank have quickly perceived the threat from the market’s newcomers and adopted a digitalization strategy by developing online solutions for customers.

The South African banking world has welcomed three major banks that are entirely digital. These are Tymebank, Discovery Bank and Bank Zero. In addition, the telco MTN announced it is relaunching its Mobile Money service in the country, thus boosting competition in the market.
Nedbank’s digitalization ambition has started to bear fruits. With its online solutions, the company reduced the number of physical windows from 764 at the end of 2018 to only 489 at the end of September 2019. Digital services generated 21% of the banking group's revenues in H1 2019 compared to only 3% at the end of June 2018.

Let’s, however, note that digital transformation generate new types of spending related to online systems maintenance. The major challenge with digitalization is the risks of cybercrime and cybersecurity violation of personal data. Moody's believes that financial and non-financial companies around the world will increasingly face cybersecurity issues as they move to more computerized services.

Idriss Linge