Standard Bank backs its R11bn tech investment push

Standard Bank continues its investment push in technology, reporting a 28% increase in digital transactions while containing cost growth at just 2%. This is after spending R11bn in the first half of 2024. 

In recent years the largest financial services group on the continent has ploughed billions into a turnaround and to give its operations a more digital flavour, having largely been seen as a laggard in this regard. 

SA operates a dual economy with a sophisticated banking system, which, for example, was a global pioneer in implementing a real-time payment-clearing system in 2006. But there are also high levels of poverty and many without bank accounts.

The country’s biggest banks have had to retrofit new systems onto the old — with varying levels of success. This is not just one bank’s problem. The industry has to invest as a collective in upgrading the system.

In 2022, SA ranked first in the average digital maturity score in consulting firm Oliver Wyman’s digital banking index when compared with eight nations, including Spain and the UK.

For its part, Standard Bank has gone down a number of alleys. In 2020 it signed a deal that would see Salesforce become the main partner on the bank’s new digital platform. The agreement also included complementary cloud services from Microsoft and Amazon Web Services.

This and other efforts appear to be bearing fruit for the lender, which says it is “at the forefront of digital transformation, adapting to the rapid growth in digital adoption by shifting its major technology expenditures from hardware to software, cloud, talent and subscription IT models”.

A big part of the bank’s strategy is to migrate customers to digital platforms. Digitally active retail clients in SA grew by 7% for the six months to June as more clients transitioned to digital channels. This translates to digital transactional volumes increasing by 23%, with a decline in branch transactional volumes of 12%.

The bank’s mobile app saw a 13% increase in the number of clients and more than 140-million logins per month in the half year. This resulted in a 33% increase in digital revenue. 

Total technology function spend in the period stood at R11.05bn, up 2% from the prior comparable period. This works out to an annualised spend of R22.1bn, in line with a similar costs incurred for the 2023 full year. 

The bulk of the bank’s IT spend is on software, cloud and technology, with staff being the other major cost driver. 

According to Jorg Fischer, chief information officer at Standard Bank: “Our focus on digital and cloud-based solutions has allowed us to reduce investment in on-premises infrastructure and lower capital expenditure. This transition is crucial for us to remain competitive and meet the evolving needs of our customers.”

Like a number of large corporate businesses, the bank has bet big on artificial intelligence (AI) and cloud computing as part of its broader strategy to push digital transformation, improve customer experience and stay competitive.

It said customers were already experiencing the benefits of AI through enhanced features on its banking app as an example, or were being serviced in the back office by AI and/or robotics.

Adoption of cloud and AI technologies is helping to lower capitalised expenditure for the bank, while continuing to invest in its people and software to support improvements in security and stability of client platforms.

However, Standard Bank said it does face higher cloud subscription costs. “The benefits include reduced investment in on-premises IT infrastructure and lower capitalised expenditure resulting from the transition to cloud-based solutions,” said the bank. 

gavazam@businesslive.co.za