CEOs - Why Banking Will Not Be The Same Again

We were used to going to the bank for a very, very long time but today, the bank is now coming at us. Those banks that haven't started, stand no chance and are like a movie on its last two days of showing. The last time they came at us energetically, something significant had happened in 2002. Mwai Kibaki had come into office and enforced fiscal discipline.

KRA sealed revenue leakages and suddenly, we were financing nearly 95% of our budget. Prior to this, the multinationals who were the biggest banks then, shut several upcountry branches as it never made sense to keep them when it was easier to stay closer to the government in Nairobi for the straightforward risk-free business in treasury bonds and bills. It was a no brainer.

And so when Kibaki stopped issuing confettirised bonds, the banks were awash with money and this ushered in the era of unsecured loans with which the banks confettirised an excited population. The banks hired salespeople to literally hawk loans like it is done with mandazis and samosas by the roadsides. A payslip was all that you needed to access credit which hitherto was a preserve of a chosen few. Kibaki's rise was a significant event that birthed more spectacles.

It brought about a constitutional moment, a credit facility moment and a free education moment as a million new children turned up in schools across the country in a single day, courtesy of free education. These gave banks the opportunity to grow their product offering.

Another big event has arrived on the back of a domino effect characterised by mind boggling scandals. Sad to say it but the Covid-19 effects are proving to be different things to different people. It is both a boon and a bane. A boon for the early adapters and and glutonous looters of Covid aid money, and a bane for those that are unrelentingly nostalgic and still awaiting the return of the good old times.

Prior to the pandemic, life was already tough and these experiences have brought a people-driven united country product. For the first time in our history, Kenyans across the tribal divide are united by the biting hardships. A new unity of purpose has come more by default than by works attributable to political genius. The camaraderie of suffering together leaves a lasting impression on emergent veterans. Banks must understand this language and innovate at the bottom of the pyramid. What could not sell in some communities may now move as the pool of references has widened beyond tribal considerations. And they must be affordable as expensive products will be shunned enmasse. The veterans will speak.

One thing is clear though at the upper end. Overdraft facilities to several organisations in the past aided them to manage their cash flow cycles around overheads such as office rent and salaries.

Today, that need has changed significantly for the many who have now given up office space. The banks will now have to develop new offerings to plug the void left by the diminished demand now that buildings are empty. Empty buildings don't make money for banks. So the banks must move with the people even to their bedrooms. This may be the time to offer a home office set up loan. Thank me for the idea when we meet.

We have also seen a shift in the use of vehicles. A good number of people now working from home, have reduced their daily dependence on cars, and sometimes not driving for days on end. In as much as people and goods must keep moving as always, still, a significant number of people have minimised their movements. This piles pressure on banks that needed to give automobile loans to new customers who are now reluctant to take them. Again, this will make banks craft innovative offerings to plug the hole brought about by the shift in work habits.

The gig economy concept is perhaps the biggest headache, the biggest mystery and the biggest opportunity all in one. It is estimated that by 2027, 60% of all jobs, shall be gig economy offerings. This means that long term loans such as those given to salaried employees will be on the decline as the new normal now demands of the banks to develop facilities that are fit for purpose. Banks must now Keep It Short and Sweet - KISS. It is time to kiss your customers afresh and in a much deeper way as you explore their financial anatomy.

With 2027 fast approaching, those in stable employment may want to prepare for an earlier exit. Technological advancements will certainly accelerate the D day's half-life perhaps to 2022 and D day itself to 2024. So if you are a banker now, influence your employer to develop a transition product for you. This allows you to use your incumbency to grow your side hustle without taking away your employers time. It could be one that your bank will still need from you when they give you that commercial bye-bye smile. Buy me coffee and I will expound on this but start developing the transition product now.

The urban to rural migration was never anticipated in the manner that people have fled the city now. In fact, one chap told me recently, "east or west!" And I completed it, "home is best". Devolution has come in to equalise the availability of basic amenities. With Wi-Fi, electricity and piped water now readily available upcountry, many people have taken the one-way ticket back home and fully restored their factory settings. Food is cheaper and life is friendlier with plenty of space to spare.

This will obviously create a food supply shock in Nairobi as shoppers move to consume from elsewhere. So as producers hurt from the effects of the migration, they have to quickly find substitutes or fitting alternatives to generate income. This has a very big room for banks to develop new products for people who already possess business skills. The bank's old consumers in new settings need new offerings as their vitals have changed significantly.

With millennials preferring to invest in experiences rather than in tangible wealth, the old paradigms are now consigned to the darkest corners. The old one-size-fits-all approach "because we say so", cannot hold any more. The bank manager must now adapt quickly around the reality of handling customers with a migratory inclined DNA. These customers need to access on-the-go type services that do not tether them to one service point. The bank must come at them actively. Banks must now develop hundreds of products to suit the evolving needs or let the rest of the world step in if they cannot innovate.

Having said this, there is still room for the traditional customer who nevertheless prefers going to the bank. With people now living longer, we shall have classic customers who may now come under the vintage services category. The good thing about this lot is that they are loyal and as such, they will continue to market your bank to all and sundry, besides, they will keep your traditional systems running and continously well tested so that should you be required to switch to disaster recovery strategy mode when all else fails, the scaling up won't hurt as much. Every bank needs some of the vintage types.

And in spiritual banking, only one Being is the same, yesterday, today and forever, and that is God. He is the only one we go to. Banks must come at us. KBA members and contenders, please stick to your lane and change instead of trying to ape the everlasting creator for yesteryear offerings are outdated. Flow with the times. Come babie come, we are waiting.