South African banks invest billions streamlining and improving their IT systems. The four largest South African banks have already spent $US 2.1 billion on information technology
South Africa’s banking sector is dominated by four big players; Standard Bank, Barclays Africa, Firstrand and Nedbank Group.
Information technology costs versus total operating costs continue to grow
All four of these banks are investing a significant amount of money into a number of substantial information technology projects, this is obviously driving up their IT costs to operating costs ratios, making IT expenses one of the biggest single investments being made by banking establishments at this time. In fact, approximately 15% of the banks total operating costs are now currently being spent on IT, this includes computer expenses, depreciation, professional fees and amortization but excludes payroll.
Standard Bank is leading the charge, in fact in the 12 months leading up to June 2016, they had already invested over $US 1 billion, equal to almost the total amount of money invested by both Barclays Africa and Firstrand put together.
Multiple and complex IT systems continue to dominate in the banking sector
The existing IT systems in all four banks already require a significant amount of ongoing investment just to operate and maintain them, this is because they are both numerous and very complex systems. A large amount of the planned future investment is targeting not only a significant reduction in the actual number of different systems being used, but also a simplification of the systems themselves. This reduction has been ongoing for a number of years, in fact in 2010 there were 250 different systems being used, in 2014 this was down to 176, and there are plans to reduce this further to 60 in the near future. A big part of this reduction will be achieved by implementing SAP, a piece of enterprise resource planning software that handles finance, procurement and human resources. This one piece of software alone is capable of doing the jobs currently being done by over 43 different systems.
Closure of expensive branches remains a priority
A primary focus for the banks continues to be the reduction in the total number of branches they have, as they are very costly. They are achieving this by expanding their levels of automation and the reach of their digital channels.
Many predict that the levels of investment in IT will continue to grow in coming years, in fact it has been predicted that they could in the near future end up accounting for over a fifth of the banks total operating cost.