COSTS PROMPT NEW THINKING

MBABANE – Banking industry costs can no longer be sustained and the sector needs to lose some weight to stay relevant and to improve financial inclusion.

When asked what FNB was doing to respond to this, Chief Executive Officer CEO Dennis Mbingo said the bank was planning to introduce new products that would further simplify banking and help the bank to maintain responsible management of its cost base. 

Mbingo narrated that the banking sector has taken several hits in the last few years. He said customer affordability was not exactly improving, yet customer sensitivity to quality and fees is growing, and rightly so.  

The CEO, who is also Chairman of the Eswatini Bankers Association, said greater regulation, especially around anti-money laundering, had meant that the costs of regulatory compliance shot up significantly in the last few years. 

“Matched with decreasing opportunities for increased bank fees and a more discerning customer, the traditional cost structure within the banking sector is at risk and will be difficult to sustain,” Mbingo noted.  

The CEO recounted that as they had always said in the last few years, they had to disrupt themselves or allow others to disrupt them and lose business.
“This is the single biggest challenge FNB sees. The interesting thing is, this is both a major risk and a major opportunity. 

The slimmest and fittest guys, cost-wise, will likely win the long race and seriously dwarf any other player who stays overweight.” Mbingo commented.

Aggressively

As a result of the changes it sees, Mbingo said FNB was aggressively reviewing its cost base, by trying to match what customers want to the relevance of their delivery channels and the cost of those channels.

“We have seen customer adoption of mobile-based banking solutions and digital self-service solutions growing at very high rates in the last three years, despite or because of, the economic shocks.  Most of our core mobile channels have rates of growth between 15 per cent and 90 per cent year on year,” said Mbingo. 
 He disclosed that ADT (Cash deposit ATMs) now accounted for half of all FNB’s cash intake volumes.

“These are not small numbers.  Customers are choosing self-service, whenever the option is availed.  The benefit of these channels is that they can be accessed at a much lower cost than branches and this approach is working for both us and the customer,” Mbingo continued.

He assured that FNB would make a concerted effort to review some of its branches and to extend its self-service network. FNB will spend a little more on infrastructure over the short-term, in order to make sustainable cost savings long-term. 

The CEO announced that the Ezulwini Gables branch would be relocated to bigger premises at Gables because customers had shown a particular preference for the area. 

He further stated a few other branches would be reduced in size to give space back to landlords and to drop lease, maintenance, and people costs.
“We do not think we can run a 21st-century bank with a 20th-century model and cost structure.  That is a recipe for failure.  Reduce costs, redeploy more staff to the front end, simplify products, educate customers about them, and allow customers to have the freedom to self-determine. 

Catchy campaigns selling old stuff in old boxes and through what appears to be cheaper prices, will lose in the long run.  We need to get real,” added Mbingo. The CEO reiterated that customers want choice. He said customers want quality and customers demand affordable access to everything. 

“Banking is not so special that it will not feel the change in the power dynamic between service provider and customer”, suggested Mbingo.
He added that; “We have to take banking to people and not expect people to always come to us.  That’s a tired business model and it’ll struggle for relevance going forward.”

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