ATMIAATM and Payments Innovation Summit

Rome, October 2019

Darryl Poonan * Head ATM Channel. Standard Bank Africa Regions, Africa is our home, we drive her growth

Title: ATM in Africa –

More than just a machine

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ATM on the African Continent

What makes banking in Africa exciting is the sheer complexity of the environments. This opportunity fires up digital innovation at a massive pace.

While new digital entrants have shown some impact, the question of how to get cash in hand to customers in most African economies which are heavily cash based has not been answered by digital disruptors.

The race is on.

The African continent has a low per capita ATM install base to serve a cash reliant population and therefore ATM stands its ground and has potential to grow!

Managing the ATM Channel in this diverse continent I call home is both challenging and rewarding. It all comes down to that moment of truth when a customer touches the screen and we say – we are ready for you!

• Cash is still king in Africa

• Banks in Africa are on a growth path – roaring to life!

• Alternate payment channels and digital banks making impact, but most customers still need cash

• High cost of delivery and low return on assets demands the channel to respond

Executive Summary

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Welcome to Africa

Jambo

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Standard Bank Group

PurposeAfrica is our home, we drive her growth

Presence20 countries in sub-Saharan Africa

Team52,000 passionate people

Competitive positionAs at 30 June 2019, we are the largest bank in Africa by assets

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AfricaOpportunity

-35% of countries projected growth of 6% or more

-17% of global unbanked adults are in Africa

Financial Inclusion strategies

Low ATMs per capita

Economies are heavily cash based

Defending the Opportunity

-High cost / asset ratio -Wealthy are shifting to disruptors -Lower segments are not generating enough revenue, high cost to serve-Central Bank legislation impacts time to market-Pricing pressure

Standard Bank’s initiatives2019-2020

Increase Revenue• DCC• Increase volumes• Smart selection

of new capabilities

Improve Efficiencies• Reduce cost• Improve ROI on

SS models• Improve

availability• Placement

criteria• Clever

management of logistics

• Leaner, simpler processes

Global TrendsDownward Pressure on ATM

Threats ATM needs to respond

-Ratio of adults to ATMs far lower than global average -Reduce cost to serve-Increase revenue streams-Optimise offering, placement-99% of payments are Cash in Africa –make ATM more relevant!

Managing in a Complex

Environment

• It is tempting to standardise everything, but not always the right solution

• Think broadly, but act specifically – tight rope!

• Across 14 countries? As a leader you cannot do this without your people, Inspiration and Passion is everything!

Africa – The ATM Storyboard

Digital disruptors

Cost pressure

Some research indicatesa 1% drop in install

Base of a 3.3 million total base

Customer behaviorchanges

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Sub-Saharan Africa, with about 350 million unbanked adults, accounts for 17 percent of the global total. 15.4 ATMs per 100,000 adults compared to 43 in comparative markets like Latin America

Africa’s ATM growth potential

ATM Potential for growth in Africa

Even where the install base is growing, the role of the ATM must change.

It must be more than just a cash dispensing machine.

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Pressure on the Install Base in digitized countriesIllustrated relationship between Wealth Segment shift and decline in ATM install base

It is clear that the install base is slowing down in the digitized countries. Illustrated in graphic A.Significantly attributed to the shift of Affluent and Middle segments to Internet and Mobile banking mainly for transactions / payments as illustrated in graphic BAre these segments lost to ATM or can they be reattracted by reimagining the offeringPotential for growth sits in the Core Middle and Mass segments– how can we readjust the cost of serving to make this lucrative?

Graphic A

Graphic B

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Banks could leapfrog physical channels ……direct to e-TailingA View on the Viability of Digital Banks in Africa

African Banks are on the Digital banking journey. While traditional Banks transform, low cost digital banks have recently entered the sector triggering fierce competition on pricing and offering.

Three new start up Digital Banks have recently opened in South Africa and a major competitor has been rolling out digital banking in other African countries. This competitor has closed branches and removed ATMs. The uptake in South Africa has been impressive, one example is 400,000 new accounts in 4 months.

However, research suggests that in highly digital countries in Africa like Kenya and Nigeria, digital disruptors are not seen as a significant threat as the likes of M-Pesa and Safaricom have existed for a while with low impact.

The advantage of digital disruptors is their ability to be more customer centric without expensive legacy systems.

The disadvantages are the immaturity of credit offering and therefore low ability to attract primary customers,the high price of security and most significantly, they do not address the need for cash – which is the primary paymentmethod on the continent.

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Check point

Rethink offeringIncrease revenueImprove customer experienceReduce costReduce branchesDemand for cashRoom to grow

Cost and ROILoss of SegmentsSlow to marketDisruptors

Opp

ortu

nitie

sDow

nward Pressure

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We operate in a diverse landscapes

Sani Pass, Lesotho

Namibia Desert

On an island in Lake Victoria

Victoria Falls

Lagos City…….And the same standards apply everywhere

IceSnow

DustCorrosionFloods

Humidity

Humidity

Humidity

Altitude

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Managing the ATM Complexity

AR ATM

Multiple vendor

suppliers

Power supply shortage

15 SLAs per country

14 countries

8 system combinations

Challenging logistics Humidity and

dustCurrency templates

constant new notes

Regulators

Aligning the team and Cultures

Shipping lead times

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Improving ATM Availability. Outline of how we improved from 74 to 96% in 1 year

74%

94%

Monitoring SystemSet KPI’s – what determines up time?Specific country configurationsCategorise sites (priority 1,2,3)Implement in countries, user access and responsibilitiesReporting

Operating ModelRoles and responsibilities. Custodians - Critical foot soldiersInclude service vendorsAdjust Service SLAs re response times

Use the output data practicallyUse reports to find bottom 20% and act on itFind root causes and develop action plansDeep dive with the teams

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Conclusion….

Striving to deliver a superior service in a complex environment is inspiring because it is not simple. And I am Lit!

I am lit because getting it right in that moment of magic when my customer transacts successfully on of any of over 2000 devices in 14 countries is thrilling.

Lets get real, a trip to the ATM is not the highlight of anyone’s day, it is a mundane but necessary task. But if the experience goes wrong, it will be discussed at dinner and understandably so.

Making banking simpler for the customer is what it is all about. To do this it is essential to have a handle on the end to end value chain - from branding design to system architecture, hardware and software builds, compliance all the way through to the custodian in the van meeting a 2 hour TaT to load cash.

16,000 transactions per hour on average and growing tells us that ATM is relevant and not going anywhere soon.

The potential of what we can do next is even more of a thrill and cannot wait. I am Lit. Sono acceso!

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Grazie, signore e signori