Increasing productivity is the way to go for financial services firms

25 February 2019 3 min. read

As the financial services sector in South Africa looks to sketch a path to recovery following a period of sustained struggle, global professional services firm PwC has revealed that a focus on increasing productivity has emerged as the path to growth for banks and financial institutions alike.

The banking and financial services sector in South Africa has been hit by a number of different forces in recent years. In a broad sense, the industry has suffered from the overall slowdown of the South African economy, brought about by a dip in oil and commodity prices and a poor business index.

More specifically, financial institutions have had to face an increasing number of barriers in an operational and regulatory sense. The South African government has followed the lead of major economies across the globe in stepping up protection levels on personal and financial data.

Areas of improved productivity

As a result the government has introduced a protection regulation of its own, while firms operating in South Africa are likely to be impacted and restricted in their operations by the General Data Protection Regulation act. In an operational sense, most financial institutions have struggled with digital disruption.

South Africa is amongst the fastest growing markets in the world for fintechs, which are encroaching on the daily borrowing and lending transactions market that has traditionally been dominated by larger bank, specifically the Big Four banking institutions of Standard Bank, Absa, FirstRand and Nedbank.

While returns on equity (ROEs) for these banks have remained fairly high and have managed to register increases in recent times as well, they have struggled to regain the massive ROEs that they were generating prior to the economic dip. Other banks outside of the Big Four are having similar trouble with ROEs.

productivity montoring

According to Big Four accounting and advisory firm PwC, the first response to this operational decline was to manage costs wherever possible. As a result, employee cuts, automation of operations, and lower prices for suppliers have become the norm in recent years.

However, such measures can do little to rejuvenate the sector that appears to have lost a lot a ground. The new approach being employed by banking and financial institutions, according to the firm, is the initiation of targeted policies to boost productivity across the organisation.

In this context, PwC has identified six potential areas for institutions to focus on when looking to boost productivity, including the development of a better understanding amongst the workforce, the rearrangement of change functions, and an overall acceptance of the platform economy.

Measures to retain talent

In addition, the firm has recommended an improvement of the digital IQ amongst the workforce, which is a trend common to nearly all sectors in the contemporary South African economy, not just amongst financial institutions. Other recommendations include the introduction of agile methods and the mastering of digital labour.

As per the firm, “All six share two common qualities: the opportunity is huge, and the implementation is not easy. Each action involves fundamentally altering human behaviour in ways that are uncomfortable and sometimes difficult to manage.”