Douglas Beckett, regional head of consumer banking at Standard Chartered explains the bank’s strategy in Africa, following its recent re-entry into South Africa and Nigeria. By Parveen Bansal.
With its roots in both Asia and Africa, Standard Chartered Bank has emerged in the past 150 years as a leading financial institution in these markets. The present-day bank is the product of a 1969 merger between Standard Bank of South Africa and the Chartered Bank of India, Australia and China, the latter being the older institution, having been founded in 1835 following the grant of a Royal Charter from Queen Victoria.
From the 1970s, the group gradually reduced its shareholding in Standard Bank of South Africa, and in 1987 it sold the remaining balance and withdrew from South Africa and a presence spanning 125 years. Meanwhile, it has continued to grow its business in the 11 other sub-Saharan countries in which it has remained present.
However, the bank re-entered South Africa in 1992 with a representative office and has more recently acquired full local banking licences in both South Africa and Nigeria, two of the largest sub-Saharan markets in Africa. Today the bank is present in 13 countries in Africa: Cameroon, Cote d’Ivoire, Gambia, Ghana, Nigeria and Sierra Leone in West Africa; Kenya, Tanzania and Uganda in East Africa; and South Africa, Zambia, Zimbabwe and Botswana in Southern Africa. It has a network of 137 branches supported by about 4800 employees.
Diversity challenge
Mr Beckett says: “One of the key challenges we face in Africa is the diversity of the markets.” He describes diversity as the varying levels of development in the banking sector and the varied consumer market. “Whereas in South Africa we are looking to satisfy unique consumer requirements via a direct banking offering, in Gambia our branches provide mainly a deposit-taking service,” he explains.
The economic and political situations being more favourable, the bank’s immediate focus is to re-invest and grow in South Africa and Nigeria. “The size of the South African market is double that of the rest of the sub-Saharan put together,” says Mr Beckett. “Nigeria is the next largest.”
With an internet-user base of 1.2 million, the bank is utilising the direct banking model to re-establish itself in South Africa. As well as acquiring a wholesale banking licence in September 2003, the bank also acquired online financial services organisation 20Twenty, previously an independently owned subsidiary of Saambou Bank in South Africa.
In the meantime, the principal markets of Standard Chartered in Africa are Ghana, Botswana and Kenya, although Mr Beckett notes emerging and growing business opportunities in Tanzania, Uganda and Zambia, where “there are improved economic environments”.
DSTV generation
“There is a trend towards a demand for personal lending products – driven by an emerging population that has been exposed to DSTV (satellite TV), making them aware of their status – they have a newfound confidence in being African in Africa; they have greater aspirations and are demanding new and different products,” says Mr Beckett. As a result, growth is no longer purely dependent on trade and export growth and commodity produce. “There is an emerging consumer market,” Mr Beckett says.
He explains that demand for consumer lending products is also stimulated by “the lower interest rates as a result of better economic management in some countries, particularly Ghana, Tanzania and Uganda”.
Mr Beckett relates the current challenges of developing a consumer lending business to those observed in the Asian markets. “The absence of credit bureau, for example – banks in these markets are unwilling to share information for competitive reasons.”
He highlights the need to educate and encourage co-operation between the banks in order to help the overall market development by enabling information exchange. Mr Beckett notes: “As interest rates drop, there are certain pressures on banks as the traditional margins are compressed. New product ranges are needed to drive revenues and we need to address the cost base, and become more efficient.”
High business costs in Africa
For Standard Chartered, improving efficiency and reducing costs is a priority. A major hurdle for cost-reduction and improving efficiency in Africa is the “relatively high cost of doing business in Africa.” Mr Beckett refers particularly to the poor domestic telecommunications networks and unreliable power supply. “We have to invest in many back-up sites and power generators, among other things,” he says.
As the poor domestic telecom infrastructure is promoting a trend towards more reliable mobile telephony, the bank now embraces this as a new channel with which to communicate with their customers.
The bank has already introduced basic SMS banking in Ghana and Nigeria and is in the process of launching the service in Kenya and Botswana. The SMS system offers a convenient and efficient service for consumers who can see the balance of their account or a mini-statements.
“Depending on the demand, we may in future offer a more transactional SMS banking service,” he suggests. “Africa is a high cash-based society. There is a lot of cost involved in processing the cash, so we are trying to culturally drive the transition towards more automated transactions.”
Moves towards automation
With a view towards migrating transaction volume from the traditional branch channel to the ATM, the bank has launched Visa Electron debit cards in eight African markets. It has invested in a private voice and data network that works via satellite to connect ATMs across Africa. This improves stability and increases the ATM and branch up-time.
Mr Beckett explains how the branch network is continuously changing: “The branch network has evolved over time just as the centres of gravity in the cities have changed over time,” he says. “We continuously assess the locations of our branches. In 2003, the bank also introduced call centres in Botswana, Kenya, Ghana, Zimbabwe, Tanzania, Uganda and Zambia. Channel development is important. We are investing to build a broader channel mix.”
As well as investing in new channels, the bank is broadening its range of products, moving away from simple deposit products and towards a broader range of personal lending products such as auto loans and mortgages. It is in the process of offering credit cards and other investment services too. “This is intended to move us from a pure, liability-basedrelationship to offering customers the opportunity to buy equities,” Mr Beckett says.
Trio of targets
Apart from building on the stability and respect associated with the brand, Mr Beckett aims to build three distinctive capabilities that he hopes will differentiate Standard Chartered from its local competition. The first is to out-sell competitors “by bringing the selling skills that the group has developed globally to bear on the opportunities in Africa”.
The second is to out-serve by providing a differentiated level of customer experience, “making Standard Chartered distinctive for its quality of service”. The final aim is to out-underwrite “through the use of superior analytics, underwriting skills and quality of people, to expand the reach of our consumer lending business”.
One other major challenge of doing business in Africa is the absence of local talent. “The industry talent pool is not deep,” Mr Beckett says. Thus training and development of local people constitute a large sum of bank costs in Africa. He adds: “We invest more of our total salary bill in training and development.”
Ethical approach
Indeed, the bank’s corporate social responsibility is well recognised by the numerous awards it has received. Last year, the bank’s ‘Living With Aids’ programme was given the Global Business Coalition On HIV/AIDS Workplace Award For Business Excellence.
“We have grown from a traditional savings bank, in which retail deposits were recycled and lent to support the corporate and commercial activity of the bank,” Mr Beckett says. “Now the challenge is to shift from a traditional savings bank to a more balanced full-service retail bank.”
