SKILLS
The extent of regulation of South Africa’s
financial services sector reflects the vulnerability
of the populace as a consequence of deeplyentrenched systemic disadvantages.
Banks have a much broader role to play than their traditional one
as intermediaries in the capital markets. Consider just one “enabling
milestone” identified in the NDP – to ‘broaden ownership of assets
to historically disadvantaged groups’.
To own and benefit from assets of various classes, one must be
able to transact. A bank account is a prerequisite. One must also be
able to form assets through savings and investments, and use these
to buffer against risk as well as to grow wealth. To acquire, grow,
protect and benefit from assets, one needs a spectrum of products
that enable one to participate in an economy by transacting, saving
and investing; borrowing and managing risk.
Banking groups provide these products – packages that offer
varying elements of this mix to various segments. But merely
allowing more and more people to participate in the economy is not
enough to fight off poverty.
The missing link in the chain is Financial Capability, which is the
behaviour that leads to financial success through the appropriate
use of bank (and other) products.
During his first term of office, US President Barack Obama’s
administration upgraded an existing national financial literacy
programme, creating “Financial Capability Month”. This was
implemented to recognise that consumers need Financial Capability
to succeed economically in the US.
Consider that the US does not have the albatross of Apartheid
around its neck. It does not have a massive majority of people living
on the breadline, and it does not face service delivery constraints
and backlogs as we do. Next to our economic and social challenges,
the fiscal cliff looks like a pothole.
If a Financial Capability Month is necessary in the US to help
people cope with the financial crisis, how much more does South
Africa need its own Financial Capability programme?
The extent of regulation of South Africa’s financial services
sector reflects the vulnerability of the populace as a consequence
of deeply-entrenched systemic disadvantages. The “Twin Peaks”
regulatory regime may make the sector more conservative, but it
will not develop Financial Capability.
Our education system has other priorities, like getting schools
to function and improving maths and science marks – it looks
unlikely to deliver Financial Capability. Similarly, government
coffers have many caverns to fill – land, infrastructure, electricity,
health services, houses, schools, public servants … they cannot fund
Financial Capability.
Banks, however, can play a significant role in supporting the NDP
by building customers’ Financial Capability – thus “breeding” better
customers who are more likely to succeed economically. Naturally,
customers with greater Financial Capability are better customers –
they pay on time, they use efficient channels, they save, and they
are better at self-managing their risk, thus transferring fewer risks
to the bank.
In a brief, intriguing review available on americanbanker.com,
Jennifer Tescher and Joshua Sledge of the USA’s Center for Financial
Services Innovation illustrate what banks can do to promote
Financial Capability. They show that relevant, timely, actionable
and ongoing interventions can be driven by banks themselves to
successfully promote Financial Capability.
In recent years, much text has been devoted to the need for banks
to play an advisory role to win and retain customers. Tescher and
Sledge’s argument is that an advisory role that builds the customer’s
Financial Capability can be driven by product and systems
innovation that enables the customer to achieve more beneficial
financial outcomes.
It is important to recognise that nuances in sales behaviour are
critical to building Financial Capability. There is a considerable
body of respectable research demonstrating that the role of a sales
person is increasingly becoming that of a facilitator and an educator.
A great sales person is a great educator. What more important role
could a banking salesperson play in South Africa today?
If we were to couple the kind of innovation that Tescher and
Sledge describe with ethical, forward-thinking, professional
sales behaviour, we would have a powerful formula for driving
Financial Capability.
Banking cannot sustain simple resource-extraction thinking
– viewing customers as assets to be mined. We increasing