By Takeshi Oikawa, Managing Director and Partner, and Nebiyou Tereffe Huluka, Project Leader, Boston Consulting Group (BCG), Nairobi
African banks have several opportunities to grow their customer base with digital tools and strategies. Digital channels hold the key to the transformation incumbent banks need to undergo and they are more than just avenues to reach and serve customers; rather, they are transforming the way people interact with money and financial services.
Customers in Africa are young and digitally savvy and digital adoption is growing rapidly across the continent. However, often customers experience frustration with the financial system and to a large extent financial inclusion remains limited. African markets are likely to see greater collaboration between banks and FinTechs to offer new digital banking services to overcome friction and address financial inclusion challenges.
Successful digital transformations in banks can unlock significant value, including a 15 – 20% cost reduction, 20 – 40% improvements in efficiency and error rate reduction, a 20 – 30-point increase in customer satisfaction scores and a 2 – 4 times acceleration in delivery of new products and services.
However, not all incumbent banks are fully prepared for the transformation to digital banking. Many are hindered by legacy IT infrastructures and processes, as well as brick-and-mortar branch banks with capabilities that might not be what is most needed in the digital world.
Digitisation Opens Multiple Opportunities But Also Presents Challenges
Despite heavy investments in digitisation and automation, many banks in Africa struggle to convert digital transformation into real business and customer value. In fact, six out of ten financial services companies still fail to achieve their transformation goals.
When banks seek to digitise, they often fall into the trap of fragmented digital investments that fail to integrate front-end (customer experience) with back-end operations.
Value-creating transformation needs to take a comprehensive front-to-back (F2B) digitisation of the customer journey as well as redesigning and digitising the operating models around customer value streams.
Why Front-to-Back Banking is Better
F2B digitisation is a way for financial institutions to address the many digitisation challenges they face. It provides a path to successful digitisation – to making banking simpler, better, and faster for customers, while accelerating return-on-investment (ROI).
A financial institution performs roughly 4,000 processes to handle all customer interactions. With this level of complexity, it’s not surprising that banking has fallen behind other industries in making front-to-back digitisation a reality.
F2B banking begins with identifying value streams and mapping them across the organisation. A bank then digitises front-end customer interactions and integrates them with digitised back-end processes. F2B digitisation is a fundamentally new way for financial institutions to organise, staff, fund, and govern their work that serves the customer and the business. F2B journeys offer a paradigm shift in the way work is organised and uncovers opportunities for the organisation, including:
Zero based reimagination, namely working backwards with major simplification implications as opposed to lean process reengineering that involves laying out the current processes, identifying waste and simplifying the processes.
Common capabilities and processes are developed across products, segments and channels while allowing for last mile customisation, versus bespoke changes for each product, segment and channel.
Integrated change across the organisation streams, as opposed to uncoordinated change from front (digital, physical/agency) to back (call centres, operations, policy).
Change governed through 15 – 20 mega journeys to maximise impact as opposed to governance of change diluted into hundreds of business cases.
Value streams are the golden thread that cuts across change initiatives and becomes the consistent vehicle for change versus no persistent and central theme to the change efforts.
Our experience shows F2B programmes can deliver significant impact. For example, a big Indian bank’s aspiration was to be number one in customer experience and productivity by digitising its processes and cutting acquisition costs. Through a F2B programme it realised a 50% reduction in complaints, doubled volume of sales/transactions, experienced a 15% reduction of the operations’ full-time equivalent (FTE) employees, and gained 50 – 95% cycle time reductions.
Harnessing the Power of AI
According to our AI Radar report, From Potential to Profit: Closing the AI Impact Gap, 86% of African companies surveyed plan to increase tech investments this year, pushing for a more disruptive usage of AI and prioritising investments in higher-impact areas. The same report found that 72% of African companies rank AI and/or GenAI as a top three strategic priority.
By harnessing the power of an array of digital technologies – including automation, AI, and data platforms – and using agile ways of working, a bank can build digital customer journeys that seamlessly deliver products and services, while running lean operations and mitigating risk.
GenAI can further enhance the gains for F2B transformations through AI-driven personalisation, fraud detection, and automation, supercharging digital banking transformation for better decision-making and customer engagement.
By shifting from fragmented digital strategies to a structured F2B transformation model that prioritises customer value creation, African financial institutions can enhance efficiency, cut costs, and improve customer experience, thereby delivering real, sustainable impact.
