Home Finance Bank branches are being replaced in South Africa by Pick & Pay...

Bank branches are being replaced in South Africa by Pick & Pay and other retailers

absa bank

According to a new report by Genesis Analytics and the Financial Sector Conduct Authority (FSCA), South Africa’s major banks are increasingly exploiting existing non-bank infrastructure to expand their customer reach in an efficient and cost-effective manner.

Retail outlets have been increasingly popular as a distribution route for banks, according to Genesis Analytics. This is because they usually have a larger footprint than banks, allowing banks to serve places where a complete branch might not be feasible.

Individuals are using retail outlets to complete transactions such as cash-in and cash-out, thanks to partnerships between banks and merchants such as Tyme Bank and Pick ‘n Pay, and Absa and Pep stores.

In 2021, 35 percent of people will conduct their financial activities in a retail store. While there has been a minor decline in retail store utilization after the pandemic, the increasing number of collaborations between banks and merchants to extend service provision beyond bank branches continues to fuel this trend.

Tyme Bank, for example, has no bank branches but works with grocery chain Pick ‘n Pay and Boxer to provide a statewide service network and extend consumer access to physical banking services beyond regular banking hours in cases where stores are open after 17h00.

Clients can also open an account at one of the store’s kiosks and conduct over-the-counter (OTC) transactions at tellers and POS terminals.

Bank branch extinction?

By contrast, it is apparent that banks have used new technology in order to reduce reliance on bank branches.

For more than a decade, South Africa’s leading banks have prioritized digitalisation and the shift to consumer self-service.

With the goal of reducing reliance on bank branches, banks have created banking apps, improved digital payment choices, and installed next-generation ATMs that allow consumers to perform a wider range of transactions.

The Covid-19 pandemic has pushed the adoption of technology for transactions by businesses and consumers, particularly in the payments area, where many customers prefer to transact with card rather than cash, and tap-and-go card transactions have expanded dramatically.

Banks, on the other hand, cannot yet go totally digital. Banks have traditionally centered their digital strategies on applications and internet banking; nevertheless, investment in USSD technology has grown to target lower-income clients.

Banks have previously focused on the development and rollout of banking through smartphone apps and internet banking platforms for computers and tablets.

The FSCA, on the other hand, has become increasingly focused on providing access through Unstructured Supplementary Service Data (USSD) to guarantee that all their clients are catered for, especially those from low-income segments of the population that may not have access to smartphone or computer ownership.

High data charges required to access banking apps and internet banking are another barrier for low-income customers.

Capitec stated in its most recent financial results that “our branch network is a crucial aspect of our business since it allows us to provide a client-facing, individualized service. The bank now has 853 locations around the country, down four from last year.

According to the bank, as digitization progresses, branches will become more focused on sales and financial education.