Call Steve for relentless innovation

I’ve commended the financial services industry in South Africa before in this blog as an example of best practice for innovation. We may have escaped the banking crisis that happened in the West (for economic reasons South Africa imposed consumer credit restrictions and foreign exchange regulations before 2009 that insulated us) but they do have it tough here. The market is very competitive at the top end and at the lower end of the market it is third world with many people too poor to have bank accounts. So it requires a huge effort both to build share among the better off and increase penetration with affordable and relevant products for the previously disadvantaged.

The winners as far as I can see are First National Bank and Capitec. The latter have developed a really slick, stripped down no-nonsense banking service that is getting traction with the less well off and those with more basic needs. FNB have hit the middle and upper middle end of the market with a relentless stream of innovation and very aggressive marketing. It has been a two-pronged attack from FNB. On the one side they have wave after wave of incentives and value add services to put clear water between them and their competitors. Everything from discounts on petrol, ebucks and free iPads to superior service and speed of response. On the other side they have made it as easy as possible to switch your account and spearheaded all this with the development of a character called Steve, who has been so heavily advertised everyone is now sick of him – but they have got the message. Steve is the guy from FNB. In the incessant radio ads the guy from the other bank is trying to get hold his customer only to be told by them that they are too late, Steve has already persuaded them to switch because of a long list of benefits their old bank just could not match. When I say incessant, it feels like every month you hear about a new innovation from FNB (this month is all about mobile banking apps and a big discount on airtime and the ability to gift it to others if you bank with FNB) and every day Steve is out there winning new customers, telling them how easy it is to switch banks (just a couple of minutes) and rubbing the competitions’ noses in it.

I watch all this with interest. You are left in no doubt that you should be with FNB, they have created a real sense of momentum and perhaps my only criticism, as someone who is already with FNB, is that I am not sure I am getting quite the love the new customers are getting. I don’t seem to know about half the things they are offering the newcomers.

I am not always a fan this kind of innovation avalanche. In consumer goods it can be confusing. In banking I think the confusion is half the value – I’m not sure anyone can give a single minded coherent benefit for being with FNB (and I suspect in many cases other banks offer very simpler things or catch up very fast). The mind boggling and continuous stream of innovation, backed by really heavy multi-media promotion, simply creates the overall impression that FNB are the winners and only losers bank with anyone else. It builds on something I was always taught about bank brands – they are like your football team. You may hope but you don’t expect them to win every single game, you just demand they win enough to make you proud they are your team. For banks you don’t expect your bank never, ever to make a mistake or be superior in every aspect of product or service, you just hope they win enough that you don’t feel like an idiot for banking with them given it is such a hassle to change. FNB have ramped this up – they are the Manchester United and by the way it is easy peasy to ditch your old bank join their club.

Relentless innovation based on a tsunami of product improvements, many if not most you cannot recall and some that are not really relevant or motivating, create one overall strong brand association – we are the best and working much harder than anyone else to stay ahead. I think this works in Financial Services, and being at heart bean counters I am sure FNB can prove this with superior financial results.

Back to Capitec – who are just as clever in my view – they win because they are targeted at people with more basic needs but they are very innovative in how they cater for them. The fundamental service is very good, very user friendly and the innovations while perhaps fewer in number are very relevant to their market.

Both are embracing technology with a vengeance – in particular mobile. This is of course the next huge battleground. Who will win – banks, telcos or Google? But in Africa, like all emerging markets, your key device (because in most cases it is your only device) is your cell phone. Those in the west who are witnessing the move from the big screen to the small screen might do well to keep a close eye on the dark continent.

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