The convergence of tech and COVID-19, and the future of Wallets. Are you ready?

The convergence of Customer Experience, Open Banking, AI, and COVID-19; and how it is disrupting the future of digital wallets

Author: Martin Dippenaar

Global Kinetic is a Fintech software development company, and over the last 2 decades we have worked with many local and international banks, financial institutions and Fintechs. Towards the end of last year, some of our clients, and many companies around the world, were talking about Digital Transformation.

Digital Transformation is essentially three things:

    1. enabling the company to deliver innovation faster,
    2. new technology, and
    3. placing the correct functionality in the hands of users.

It is about technology, but it is also about culture.  Companies had realized that to be relevant in the future, they had to create digital processes and keep up with the rapid pace of technology changes. Some took it more seriously than others, as they had already started to see disruption in their own verticals due to new technologies being exploited by up-and-coming startups, and new markets being created through innovation. There was a lot of talk of “All companies are tech companies”, but this talk was mostly seen as something that is only important strategically over a medium to long term; maybe the next 5 to 10 years.  Up to that point, a staggering 70% of companies were failing in their transformation efforts. These failures happened for many reasons, but mostly because of lack of drive by top management, as well as companies not accepting what Digital Transformation entails. Most companies felt that their digital offerings, in other words, the products in the hands of their consumers combined with their other services, were adequate to stave off competition. Many big companies, banks specifically, had started to notice some disruption in their traditional marketplace, and had created massive funds to look for new and innovative technology to either invest, or to purchase outright. These banks have noticed the emergence of many new challenger banks as well as non-bank companies moving into the banking space. Companies such as Amazon, Apple, and closer to home, various new challenger banks such as Thyme bank, Discovery Bank, and many South African retailers challenging the banking space.

Companies have started piloting many of the relevant technologies. Figure 1 shows some of the technologies that I thought was relevant, plus the stage that they were in. I have included some processes and concepts into this slide as well. The circles show, from the outer layer to the inner layer, the adoption level of these technologies and concepts. The items in red are the ones who would most likely result in transformational business impact.

Figure 1:


The center is “Mainstream”, or those technologies and processes that are used daily by many organizations. They may not be mature, but they are in common use. Some technologies, like hybrid cloud and API platforms have become mainstream; although I should point out that Open Banking (a super important API Platform implementation), is itself mainstream in many parts of the world, but is not yet so in South Africa. In the Fintech space, the adoption of some of these technologies is either promoted or inhibited by regulation, or the lack of regulation.

I include Digital Transformation here in the Early Adoption ring. In a normal world, I could have asked for a show of hands of who had embarked on Digital Transformation at the end of 2019, but take it from me, not many companies had. Also in the Early Aoption ring I have included Immersive Media (i.e. Virtual and Augmented reality), Internet of Things (i.e. devices connected to the internet that makes our lives easier or more informed), Blockchain, Instant Payments (not really a thing in South Africa but very important in other parts of the world), Natural Language Processing, and Artificial Intelligence. Remote Process Automation, even though it is a type of AI, has not had the early adoption that AI has had. These are chatbots and other types of automation that hopefully provide your customer with a better experience.

Closer than “Emerging” is “Adolescent”, or the technologies that are coming of age. For me 5G, a super important technology for the future, and Remote Processing Automation, are still in this circle but touching “Early Adoption”.  5G, which is the next iteration of mobile bandwidth, will transform the way we communicate with our customers, and enable applications that are not possible without it. The outer ring is “Emerging”; those technologies on the fringe which have the power to eventually transform the world. I only include Quantum Computing in there, because of all the technologies presented here, Quantum Computing and AI will change the world as we know it – but that is still some years off.

So, to me, this was the world at the end of 2019: with some companies taking advantage of the emergence of new technologies and processes. Many companies, however, either ignored these up-and-coming technologies, didn’t see the relevance to them, or decided to look at it later.

Eight months later, the global pandemic had changed the face of the business and the consumer world entirely. We are used to expecting disruption in verticals, yet we have never had a disruption that touched every person, and every business, in the world at the same time.  Suddenly, people can’t go to the office, people can’t go to branches and shops, and people do not want to touch anything or be in close proximity to others.  All of a sudden, companies realized that they have to get their full feature set of products into the hands of their consumers or die. Not only that, but their employees were mostly not at work; slowing business pace dramatically as companies tried to figure out how to work with their staff being mostly remote. Companies that had embarked on Digital Transformation in 2019 or before, were now at a distinct advantage compared to those who hadn’t. As were those companies that played directly into the new behavior of clients. Wallets and touchless transactions, previously a convenience product, suddenly became essential, as people started showing a reluctance to handle cash. In South Africa, companies like SnapScan and Zapper were at an advantage, providing levels of touchless functionality that cards and cash cannot.

The global pandemic caused a push of technologies that were in the Emerging stage, into, or a lot closer to become Mainstream. This slide shows how many of the technologies that were in the early adoption space, have suddenly being squeezed by COVID into the Mainstream. All of a sudden you need your full product suites, including onboarding, to not only be fully digital, but also a fantastic experience for your customers.

Figure 2:

Nearly all the companies we speak to since the COVID-19 pandemic, have accelerated their Digital Transformation and the adoption of what was previously seen as early adoption technologies. Companies are suddenly investing in RPA, Artificial Intelligence, Touchless, and relooking at the customer’s User Experience. This is the crux of the matter: your customer’s digital experience, and for the Financial Sector, your wallet or mobile banking app.

The Wallet

For today’s customer, transacting is about convenience, and customers expect a full digital service with as few impediments as possible. Customers expect easy onboarding without having to go into a branch or office. Customers expect to get hold of you easily and talk to you when they want to; and when it suits them. Customers want to transact without touching anything, and they want to do it everywhere, not only in shops, but also online. Customers also expect that you are trustworthy and that their information and transactions are secure. Your competitors will be offering this to your customers.

You will also notice traditional banking apps are now starting to get the functionality you previously expected in wallet apps, but not necessarily in your banking app. Nedbank’s latest update allows you to scan QR codes directly from their banking app using Zapper, Snapscan, Pay@ and Masterpass, and allows you to pay at restaurants and even at malls to pay for your parking ticket. Expect touchless technology to roll out in most big South African banks’ mobile apps this year. Shoprite’s new app and product requires no FICA, only your ID number, and has no transaction fees, or onboarding or monthly fees at all. No transaction fees.

So wallets and mobile apps are becoming your near-exclusive touchpoint or channel with your customer. It is how you put your product in the hands of your customer. It is how you communicate with your customer, how you advise them with added services, and how you build your brand. The question is: how do you compete with new agile Fintech’s, challenger banks, and non-traditional companies coming for your customer? And how do you stay relevant, not only with technology, but innovate as well?

The Future

I am envisaging a world where a couple of things happen in the wallet space beyond the current expectations of touchless, easy onboarding, free transactions, convenience of instant payments to friends, and for bill payments alike. Some additional features may include:

    1. customers will be offered new ways of interacting with their banks,
    2. Artificial Intelligence and your knowledge of your customer will be mined to provide exactly the service your customer needs at the right time,
    3. Banks will not be the only ones competing for your customer. Your will be competing with free services.

In terms of customers being offered new ways of interacting with your banks, don’t expect the wallet to remain on your phone. Many of us already use voice assistants, and expect services like Amazon’s Alexa, Googles Home and Apple’s Home Pod to provide your full set of services by voice. These applications will be able to do everything from onboarding, opening and changing accounts, communicating with you, all the way to transacting. Expect people to talk to you in the language they want. {and have their voice translated in real-time?}

This year, most phone providers will start releasing 5G enabled phones. Besides the security and fraud prevention that this will allow, new AR products like Apple’s Glasses will require 5G to enable all functionality from within a private augmented reality world. This is not sci-fi; these glasses are expected to be released next year. No more phone required; and definitely no physical wallet required.

Artificial Intelligence is used more and more to interact with customers, as well as to predict what customers want; and offer that to them. We are not unfamiliar with this idea, however there is a shift in customer’s using AI to figure out what is best for them. Artificial Intelligence will allow applications to pay bills for the customer, or track expenses and spending behaviour without explicit instructions from the customer. Artificial Intelligence applications will also suggest that customers switch products or accounts from one service provider to another, or do it seamlessly based on what it already knows about that customer. Expect AI to do a lot of work on behalf of the customer. Expect new Fintech products that leverage this capability on behalf of the customer.

Banks are not the only ones vying for your customer’s attention. New Fintech products emboldened by Open banking and its successor, Banking as a Service, will allow the wallet behavior I just spoke about. Wallets, or mobile banking apps, will be able to access services instantly at banking institutions; enable a customer experience where the customer doesn’t necessarily see your brand as the overriding factor when allowing their AI apps to switch products from your bank to another. Banks have long depended on the trust built over the years with their customers, as well as the trust that customers put in banks due to regulation and compliance. Yet research shows that younger people are totally comfortable using new peer payment products.

In addition, new entrants like Facebook with its desire to be a global bank providing free banking services to its 2.6 billion active daily users, will be vying for your customer.

What to do

In considering all of this, what should businesses do?

  1. Take your Digital transformation seriously. Speed of delivery and getting innovative products in the hands of your customers is imperative.
    a.   Be ready to reinvent and look for opportunities with partners or up-and-coming startups,
  2. Understand what is coming from a technology perspective and ensure your rolling strategy is on point.
    a.    If you are a bank, consider how you can use Open banking and Banking as a Service to expand your offering and expand your channels.
    b.    In order for banks to survive into the future they need to own the technologies that are enabling consumer usage.
    c.    Fintechs have been encroaching on incumbent banks for a while now, and by moving to Banking as a Service, banks can turn these threats into opportunities,
  3. If you are a bank, consider that your competitors are moving to feeless banking and no-fee transactions.
    a.    How will that affect you, and how can you change your business model to compete?
  4. Use data and analytics to drive decision making,
  5. Lastly, own your customer. Your customer base is everything.

I want to refer back to Figure 2. I have not mentioned the triangle in this graphic as yet, but you will notice that it is the three pillars of Digital transformation: Business, Customers and technology. Without these three being in balance you will not have true Digital Transformation, and it will be more difficult for you to grab opportunities and innovate.

Food for Thought

Finally, have a look at this meme. Most of you would have seen this over the last year or so. It attempts to frighten but it also intends to convey how disruption has touched many industries. The biggest taxi company in the world owns no cars. The largest accommodation provider has no real estate and so on.

I would like to present this in a slightly different way. This is my interpretation of the previous graphic.

It is clear from these disruptive technologies and companies that the customer is the asset and the differentiator.

Lastly, I want to add another meme for you to consider: “The world’s biggest bank has no gold but has 3 billion customers”. This is a future scenario, and the signs are already there.