Strategic implications of Fintech on South African retail banks

Background: Since the global financial crisis, banks have been exposed to new opportunities and threats unprecedented in history driven fundamentally by technology. So-called 'Fintech disruptors' are aggressively tapping into their service delivery chain to offer clients a better (cheaper, more convenient or efficient) value proposition. As banks have subsequently been forced to think more strategically about how to conduct themselves due to the imminent use of, for example, virtual reality, artificial intelligence, biometrics and big data, regulators have simultaneously had to ensure that the pervasiveness of technological disruption does not threaten the soundness of banks and the stability of economies. Aim: To identify the strategic implications of Fintech on South African retail banks. Setting: The study is conducted in the South African retail banking industry. Methods: A post-positivist paradigm approach that is qualitative in nature. Results: There are several main findings: firstly, technology-based skills are becoming mandatory for staff and regulators alike; secondly, interaction policy is migrating clients towards a remote-based distribution strategy; thirdly, the bank of the future will not rely as heavily on brick-and-mortar branches as it has in the past; fourthly, new competitors are entering the fray and offer competitive digital-only solutions; finally, given the innovation and growth shown by these disruptors, financial sector regulators will have to find ways to hold them accountable. Conclusion: By adapting to the Fintech revolution, South African retail banks are hoping to become strategically pre-emptive rather than merely proactive. This will allow them not only to identify opportunities first, but also to offer solutions before competitors are able to do either of these.