Nedbank’s digital transformation plan 90% done

One of the big four banks ( Nedbank)  has an R1.3 billion budget to finish its digital transformation plan. After the JSE-listed company released its financial results for the first half of 2022, Mfundo Nkuhlu, chief operating officer of Nedbank, confirmed this in an interview with ITWeb this week.

Nedbank had good financial performance over the time period, with a 26% increase in headline earnings per share and strong balance sheet measures allowing for an 81% increase in the interim dividend, which is now back at the interim dividend level from 2019 prior to COVID.

According to a statement from the bank, the IT construct for Nedbank’s Managed Evolution technology plan is 89% complete, enabling continuing double-digit growth in customer digital KPIs.2.4 million (H1 2021: 2.3 million) and by 60% since H1 2019 more retail customers in South Africa are now digitally active, according to the report. In comparison to H1 2019 and H1 2021, this currently represents 67% of clients with main banks.Nkuhlu said to ITWeb in March that the bank’s R9 billion investment to upgrade its IT stake was beginning to show results. The project was around 85% finished at that point.

The bank notes that the Nedbank Money app has received positive reviews from customers for years in both the Apple and Google app stores, with lifetime store ratings above four (out of five).

It states that 1.8 million customers actively use the Nedbank Money app, growing 13% year over year and 167% since H1 2019. (H1 2021: 1.6 million). The Avo super app has registered over 1.5 million users since its launch in app stores on June 19, 2020, an increase of 4.6 times over the previous year. Additionally, over 24 000 businesses have registered and are selling their goods and services on this e-commerce platform, an increase of 37% over the previous year.

Final touches

Nkuhlu credits the ongoing Managed Evolution technology approach for these online successes.“We are expecting to complete the Managed Evolution technology strategy over the next two years,” he tells ITWeb in a video call. With 89% of the project being complete, that means in terms of the IT cash flow spend, we are at about 98%. In our estimation, we are left with about R1.3 billion of additional spending over the coming years principally to address three areas – refactoring of core banking, particularly in respect of deposits and transactional products; the completion of the payment modernization program and thirdly, some outstanding components of onboarding and servicing of clients.”

Nkuhlu adds: “What’s gratifying about this is that there is a little risk now because we now know where that spend will be going. This minimizes the risk of overspending on the program knowing that IT programs always run the risk of overspending, we think we have now moved away from that.”

He continues by saying that 51% of Nedbank’s anticipated run-rate gains from the digital transformation program have already been realized.“The benefits are already coming through and that’s important because that is the basis of the business case. We will be able to eke out these benefits relatively quicker and we will sustain them over time.”

Nedbank is largely running the project internally, he notes. “We have the internal capacity to do this with the consulting services of McKinsey and PwC. What the Managed Evolution technology strategy does is it allows us to innovate quickly because we have modernized our infrastructure which is now more agile, and more modular and it allows us to innovate faster. It has also allowed us to rationalize our IT platforms from 250 to 76 now.”

Digital sales boom

On the innovation front, he claims that the bank is observing the growth of digital sales in the group, which are currently 50% higher than they were a year ago.

“Digitally-active clients are now at 37% of total active clients and they are at 67% of main-banked clients. So you can see the ramping up of digital as the channel of choice. We see that reflected in banking app volumes growing 35% year on year.

“As a consequence of that, the growth also extends to our ‘beyond banking’ initiatives where we focus on platform ecosystems, as well as ongoing disruptive market activities. In that regard, Avo, which is our super app, now has over 1.5 million users registered and actively using that platform.

“We now have access to over 10 000 drivers, which is the delivery network across the country that allows us to complete the last mile of delivery of goods to clients. That is reflected in a nine-fold growth in gross merchandise value. So Avo, as our super app, is up strongly, consistently with what we see on our digital channels.”

Nedbank has decreased the footprint of its physical branches as a result of more customers preferring digital channels, claims Nkuhlu.

“As clients start to transact more digitally, we also have to rationalize our physical infrastructure. Over the past two-and-a-half years, our physical branches have reduced by 8%. We also see that benefit coming through on the headcount front, which is now 10% down, and we have largely achieved that through natural attrition, so we have not embarked on an active program of staff reduction.”

An exclusive agreement between Nedbank Commercial Banking and the global deal-matching platform Opportunity Network was announced in late July. Customers have been able to use the collaboration beginning on 7 August  2022.

The Opportunity Network, according to Nedbank, is a digital deal-matching platform that connects over 50,000 carefully selected firms and private investors to business opportunities in over 140 countries with a $500 billion transaction volume.

The new collaboration will allow Nedbank’s clients to build their businesses on a reputable and globally recognized platform. The bank claims that as part of its “Beyond Banking” services, Nedbank Commercial Banking clients will receive a free subscription to the Opportunity Network platform.

“This is an exciting partnership that unlocks opportunities for our commercial clients to connect with businesses around the world at a time when they are looking to access new international markets to promote their products and services,” says Mark Rose, Executive Head of Strategy and New Business Development at Nedbank Commercial Banking.

“This digital platform will open doors for South African businesses that wish to connect with large investment funds and business opportunities worldwide. It’s expected that the international dealer network will help boost the South African market by facilitating trade ties in the region,” says Nedbank.

“Our goal is to improve the way of doing business and create equal access to opportunities, especially in countries that are experiencing great economic development, like South Africa,” said Opportunity Network CEO, Brian Pallas.

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