Using digital channels to deliver financial services has the potential to provide new options for people to manage their money in ways most appropriate, safe, and convenient for them. It can give customers greater control over their financial lives by increasing access to information (anytime, anywhere) and giving them the ability to transact remotely (and outside of branch hours). But managing money in unfamiliar ways does not happen overnight. Customer empowerment—a process that builds trust and confidence through an interactive relationship between providers and customers—is critical to increase uptake and use of digital financial services (Koning and Cohen 2015). Empowered customers are more likely to make informed choices, to use services that they value, and to have greater control over their financial lives. In the long run financial service providers that empower their customers stand to benefit as well.
Absa’s Challenge: Increase Customers’ Use of Digital Channels and Reduce Branch Traffic
Absa, a large retail bank in South Africa, is heavily investing in digital channels for the mass market segment as it aims to become the “go-to” bank and help customers achieve their ambitions. Helping customers transition to “smart banking” with cheaper and more convenient banking channels is a core part of Absa’s strategy. Absa services its customers through 802 branches, 9,588 automated teller machines (ATMs), and mobile and internet banking solutions. The bank also developed initiatives such as the PEPplus simple bank account, which is offered in partnership with the low-income retailer PEP, and investments in in-store banking services.
However, despite these investments and initiatives, Absa has lost market share and customers in recent years. As of June 2014, Absa had 9.2 million customers, down from 10 million the year before. Approximately half of Absa’s customer base—what Absa refers to as the “inclusive banking segment”—earns less than R3,000 ($243) a month. Uptake of digital services by this segment has been limited. These customers mostly visit bank branches to perform basic banking transactions, check their balances, and deposit small amounts. These bank branch customers also have access to Absa’s digital banking services such as ATMs and point-of-sales (POS) devices. According to former Absa staff, roughly half of them are registered for mobile phone banking, but only a fifth makes use of it and primarily for airtime top-ups only. People in the inclusive banking segment struggle to make the transition to digital despite potential cost savings. Costs of branch transactions are significantly higher than that of digital transactions. In addition, Absa estimates that the costs for inclusive banking segment customers to get to a bank branch is twice the costs incurred by other segments. Customer research showed that many people lack knowledge of how to use digital channels and what purpose they serve.