Big-four bank Nedbank has set its sights on completing its multibillion-rand IT refresh programme by the end of the year.
This is according to Mfundo Nkuhlu, Nedbank chief operations officer, in an interview with ITWeb yesterday, after the bank announced its financial results for the six months to 30 June.
The group delivered a relatively strong financial performance for the six months to 30 June, amid a challenging operating environment, as headline earnings increased by 8% year-on-year (YOY) to R7.9 billion.
Nedbank's R9 billion IT refresh programme is called Managed Evolution. The initiative seeks to build a modern technology platform for the bank and its clients.
“The Managed Evolution programme is 95% complete, and we are still committed to its completion by year-end within scope, time and budget,” said Nkuhlu.
“What that means is the real risk with IT projects of this scale is overrun on expenses. We think that, materially, this has been de-risked now. The cash flow spend on this peaked in 2017 and it has been coming down ever since.”
He noted that after the bank completes this major tech investment, “it does not mean investment in technology stops, but we now have a more sustainable cash flow projection per annum over the period ahead”.
On the bank’s top priority list to complete the programme is finalising the implementation of core banking modernisation, as well as the completion of the digitisation of client journeys in respect of the home loans portfolio and vehicle finance, Nkuhlu said.
“That is what we seek to complete by year-end and perhaps with some implementations rolling into the early part of 2025.”
Reaping rewards
According to Nkuhlu, the programme has resulted in benefits in respect of clients, as well as the bank.
He pointed out that boosting digital sales is one of the biggest benefits of the initiative.
Digital sales now contribute 64% of new sales in Nedbank’s retail business, he revealed. “That’s a significant ramp up from the early period when we started. If I go back to 2020, the level of digital sales was at 28%. So, this is pushing us to our long-term target of getting digital sales to at least 75% of total sales.”
In addition, he said, the financial services firm has been able to digitise products for individual clients and juristic clients, which helps them to self-service.
“On the individual clients, we have over 200 products and services that have been digitised, and in terms of juristic, over 400. That means clients can now interact with us remotely without necessarily using our branch infrastructure and obtain full services.”
According to Nkuhlu, the technology platform has also helped the bank to run its operations more efficiently.
“We have reduced our floor space by 38% if you look at our branch infrastructure. We have also reduced our headcount since 2020 by 9% cumulatively. We do not have a programme of deliberately reducing headcount; we are doing this through natural attrition.
“As clients transact with us digitally, we will need fewer warm bodies, particularly for basic processes. Our focus now is on the acquisition of highly-skilled personnel, particularly in key areas of data and analytics, because we see that as the fuel of the future economy. That’s also the fuel that will drive growth in new sources of revenue in the banking business.”
He noted Nedbank recently established a data and analytics team, which has to work and interface with the rest of the organisation.
Digital advancement
Nedbank’s financial results show the JSE-listed financial services provider made some gains on the digital front.
Nedbank Money app active clients increased to 2.6 million in the first half (H1) of 2024, up by 16%. Transaction volumes on the Money app increased by 13% YOY and transaction values increased by 19%.
The bank says revenue from value-added services grew by 28% YOY across prepaid data, voucher and electricity purchases, and the sending of money to cellphones.
The Nedbank Money app (Africa) reported a 19% YOY increase in app users.
“Our digital initiatives helped us to increase the number of digitally-active retail clients in South Africa by 9% YOY to three million, representing 70% of retail main-banked clients (H1 2023: 69%),” says Nedbank in a statement.
“Retail digital transaction volumes and values in South Africa both increased by 7%. Digitally-active clients across the NAR [Nedbank Africa Regions] business increased from 60% to 67% of its total active client base.”
Since its launch in 2020, the Avo super app (SuperShop) has signed up 2.7 million clients (up by 19% YOY), with over 24 000 businesses registered to offer their products and services on this e-commerce platform, the bank reveals.
Nkuhlu also pointed out that the Managed Evolution platform resulted in the bank delivering on its target operating model (TOM 2) targets, which was a savings target of R2.5 billion.
“We delivered R2.6 billion against that target. This means that cumulatively from 2020, when we completed TOM 1, we have had R4.5 billion of savings.”
Share