Electrifying Cash Management: Africa’s Digital Journey

Sparks are flying across the treasury landscape in Africa as digital cash management and e-payments become the order of the day. Dushen Thathiah, Head, Cash Management for Transactional Products & Services, Standard Bank, explains why API-driven ‘integrated’ channels are on treasury leaders’ lips and outlines the cash management risks and opportunities resulting from Africa’s digital sunrise.

Eleanor Hill, Editor, TMI (EH): How are treasurers’ channel choices changing when looking to access cash management and payment services in Africa?

Dushen Thathiah (DT): No one can deny that the traditional image of banking in Africa revolves heavily around physical branches. In fact, Standard Bank’s branch network has long been a competitive differentiator. Clients have enjoyed being able to easily access our cash management services through our local branches, which catered to client needs and reflected their ecosystem.

Over the past decade, however, a significant shift has taken place towards digital rather than physical channels. It’s hard to believe, but 80% of clients’ transactions are now executed via electronic platforms rather than in a branch. This shows the popularity of what I like to call ‘interactive’ channels.

We’re also seeing the rise of ‘integrated’ channels among larger multinational corporates who want seamless integration between the bank and their enterprise resource planning [ERP] system – either via host-to-host [H2H] or application programming interface [API] connectivity. Nevertheless, among the local corporates in Africa electronic banking platforms, such as internet portals, are more prevalent.

The reason why we’re starting to see the shift towards electronic banking and away from branches is, I believe, that clients are starting to look for instant gratification, extra efficiencies, and the ability to process high-volume transactions. That’s something you can’t offer via the branch network; whereas technology enables us to provide these kinds of services.

EH: You mentioned interactive channels and integrated channels – could you expand on the difference between these two approaches?

DT: Interactive channels involve a touch point with the bank in order to access cash management and payment services. Logging on to an internet banking platform or accessing a mobile app are classic examples of this interactivity.

Integrated channels, meanwhile, aim to provide the client with seamless access into the banking environment. All the client has to do is create an instruction in their ERP and it goes straight into the bank’s systems via H2H or API, without any further client engagement.

The requirement to integrate channels is predominantly driven by large volumes. No treasurer wants to process large batches of payments on an internet banking platform because capturing the individual details for each payment is incredibly time-consuming. Multinational clients also often find it easier to build the business case for integrated channels.

EH: Is host-to-host popular across the continent, or concentrated in the hubs where multinationals are typically headquartered?

DT: In South Africa we see a much greater adoption of host-to-host connectivity compared with the rest of the African continent. In fact, 60% of our transactions come via our H2H platform in South Africa and 40% come via our internet banking platform and branch network. The technological sophistication of our clients in South Africa – many of which are indeed multinationals – is what fuels this dynamic.

On the rest of the African continent, the adoption of H2H technology is still in its infancy. Most corporates use branches and internet banking platforms; only 10% use H2H. The challenge for these clients is the maturity of their technology and IT systems – often their infrastructure simply isn’t set up for integration. Non-multinationals also often struggle with the concept of opening up their ERP system, so there is an education piece to be done.

EH: How popular is API connectivity as an alternative to H2H?

DT: APIs are still a relatively new concept in Africa. Awareness is growing as Open Banking is starting to unfold across the continent. But once again, the drive for API connectivity is coming from the multinational clients from Europe and the US who are challenging the African banks to adopt API technology. One of the main reasons that they are keen to use API connectivity is that it is relatively easy to implement compared with traditional H2H connections.

EH: Is mobile growing as a channel on the African continent? Are large corporates embracing it yet?

DT: We’re seeing increasing requests from clients to engage using their mobile devices, especially in East Africa. However, the requests typically come from smaller businesses that want the ability to bank on the go, rather than large corporates. Typically, the latter have office-bound treasury functions and they therefore do not believe the benefits outweigh the risks, especially cybersecurity concerns.

EH: How do you support your clients from a cybersecurity perspective and on their own digitisation journeys?

DT: All of our platforms have two-factor authentication. This is a critical component of cybersecurity, and it helps build trust and reassurance among our clients. We help them understand the true benefits of digitisation, and enable them to see beyond the concerns. We also work with them to design an optimal digital architecture – offering the benefits of new technology alongside the right controls to remain secure.

EH: Are there any other new or evolving technologies that are going to be relevant for corporate treasurers going forward?

DT: Artificial intelligence [AI] and robotic process automation [RPA] certainly hold promise for treasurers. We have seen examples of these technologies being put to use in various areas of treasury – from cash flow forecasting to bank reconciliations.

Banks are also looking for ways to leverage these technologies to better interpret the client data they hold, and to provide analysis to treasurers around their buyer and supplier relationships and payment behaviours, for example. As well as giving corporates better insights into their cash flows, this helps the bank to understand where they can better support clients with financing options.

EH: What parting advice do you have for treasurers who are not necessarily up to speed with their connectivity at the moment?

DT: There is no need to back just one horse in the channels race. Interactive channels and integrated channels will continue to live side by side in the banking environment in Africa. To make the most of innovation, however, treasurers should work with a banking partner that has the scale, expertise and budget to invest in technology – while taking cybersecurity very seriously.

Standard Bank has innovated consistently over the past 156 years and we continue to push the treasury envelope in Africa. Through our own investment in technology and strategic partnerships with fintechs, we can offer a flexible and agile technology stack to treasurers, giving them instant gratification and greater efficiency, within a secure environment. Of course, we will continue to offer branch services across the continent too. Digitisation is not right for every corporate; not just yet.