Lessons from Capitec bank downtime
Innovation is proving to be hard for some South African banks. Capitec bank has become the latest victim of technology malfunction which has affected operations of its ATMs, App and USSD service.
Many South Africans who earn a wage were unable to withdraw their hard-earned weekly payments. Capitec explained it as an infrastructure problem in the central servers that support their banking channels.
The reality is that Capitec is paying a price for innovating at a speed that has never been seen before in the banking sector.
For many years, the ATM remained the key innovation in banking without any bank introducing new innovations. Online banking, banking apps and recently branchless banks occurred over a very short time. Capitec became a leader through innovation. The bank challenged traditional banks that were using legacy technology systems to innovate.
During the lockdown period, Capitec results showed an increase of 24 percent in digital banking clients, since August 2019, which by 2020 amounted to 7.3 million clients, making Capitec South Africa’s largest digital bank.
According to Capitec results, the accelerated adoption was driven by clients’ need to stay safe and bank from home, while benefiting from lower transaction fees and zero-rated data charges on the app. Consequently, app, internet and USSD transactions collectively grew by 52 percent to 556 million during the first six months of 2020.
The growth seen by Capitec was unprecedented in the banking sector and it was all because of its use of technology. Although other traditional banks also followed the Capitec script of using technology they based their systems on legacy banking systems that were robust. It’s safe to say that Capitec started from scratch and they kept on innovating. They were not as cautious as other banks in as far as adding layers and layers on top of their technology systems. What happened to Capitec was bound to happen. Innovation by its nature is risky; it is even riskier in the financial and banking sector.
What has happened to Capitec bank should serve as a warning to other banks that are pursuing innovation. Capitec failed to offer non-digital solutions when its clients needed them most.
Tech is great when it's working, however, when it fails there’s a need to offer alternatives.
The banking sector needs to be cautious about digital transformation that cuts out non-digital means. Experience has taught us that technology will fail at some point and when it does there’s a need to maintain operations.
The Capitec incident happens at a time when we are witnessing significant adoption of technology in banking and related fields. There's excitement about branchless banking. Perhaps the most important lesson here is that it may be wise to keep some branches and other non-digital means to support clients when technology is failing.
As we see more adoption of technology which fuels less human touch there will be a proliferation of digital services across sectors. Some of this tech adoption will not necessarily improve services. It will just cut the cost of hiring for businesses. As seen in the manner in which artificial intelligence is applied currently, some services are not satisfactory for clients.
Machines cannot do everything, leading to poor services for clients. Human beings on the other hand can adapt and go beyond a script and thereby satisfy a customer's need.
In the future, services by human beings will be a premium service. Banks that implement tech solutions while maintaining non-digital means that include a human touch will thrive.
For now, Capitec bank is up and running, the bigger task ahead for the bank is to develop measures that will maintain its services when tech malfunctions again.
Wesley diphoko is the Editor-In-Chief: FastCompany (SA) magazine. You can follow him via Twitter: @WesleyDiphoko
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