IN an economy with sound economic fundamentals, interest income is the conventional way banks generate most of their revenue. In Zimbabwe’s “casino economy” that is not the case as sub-optimal interest rates determined by the central bank, in the face of unbridled inflation, has forced local banks onto an unconventional revenue generation path, with most of their revenue coming from non-funded income.
ceteris paribus:Eben mabunda
Meanwhile, significant IT developments have provided cutting-edge solutions to the banking fraternity on a global scale, whose results have also cascaded to sub-Saharan Africa and penultimate Zimbabwe. Over the past couple of years, Zimbabwean banks have collectively spent over US$100 million on upgrading their core systems, cementing their online banking services, launching mobile applications and even offering Whatsapp bot interactive services.
While the idea is to bring convenience and ease of banking, IT is proving to be a double-edged sword, which also allows for branch rationalisation. A tough operating environment, compounded by the economic effects of the Covid-19 pandemic, has necessitated cost-cutting initiatives in order to keep the financial institutions afloat. In the same bracket, the novel coronavirus has disrupted normalcy of business, placing a high demand on robust digital systems as telecommuting gains traction.
Tech developments have provided a solution which allows banks to trim down their operations with a migration from brick and mortar structures onto their digital foray. Over the past 18 months several local banks have closed and “merged” some of their branches on the pledge of “efficient” digital services.
In August, RSA-headquartered financial institution Nedbank closed its Kwekwe branch, “merging” it with the Gweru branch. In effect, should Kwekwe clients encounter challenges with their bank they would need to seek assistance from Gweru — 70 km away.
Standard Chartered Bank, one of the oldest banks in Zimbabwe in 2018 launched the Standard Chartered App as part of a broader group digitisation exercise. In the last quarter of 2019, StanChart streamlined nine of its national branch network to just three centres; two in Harare and one in Bulawayo.
Elsewhere, the StanChart group opened branchless banking operations in Ivory Coast in 2018 as part of the group’s digitisation programme. Bill Winters, StanChart Group CEO is on record saying the group intends to maintain its presence in Zimbabwe.
In an exclusive with Equity Axis, ZB CEO Ron Mutandangayi disclosed that the group’s advances on the IT front, would also allow for the “rationalisation” of the group’s banking operations with branch closures on the cards
Regionally, Standard Bank in South Africa closed about a hundred branches between 2019 and 2020 in a migration toward digital banking. In the same country, a fully digital bank, TymeBank was licensed in 2017 and hit a million users by the end of 2019. TymeBank does not have any physical bank branches and relies on an Android banking App, an internet banking site and a partnership with two retail chains, Pick n Pay and Boxer.
Standard Bank’s Zimbabwean subsidiary; Stanbic this December announced plans to terminate physical operations at its Hwange and Westgate branches effective December 31, 2020 as it embraces digital banking solutions. This move follows a similar closure of Chitungwiza and Beitbridge branches last year. The two imminent closures will leave the Standard Bank group subsidiary with 15 branches nationwide, down from 19 last year.
However, while the closure of branches significantly reduces administrative costs it comes with its negatives. This translates to retrenchment of many employees as most of the banks’ virtual activities become automated.
Technical glitches are also a part of the basket, inadvertently. Fact is, while tech developments bring ease and convenience, in this part of the world where technological ecosystems lag behind those of the first world, branch closures leave clients at the mercy of flawed digital systems which still need perfection.
Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — email@example.com.