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South Africa’s Absa Group is seeking partnerships with fintechs in a strategy aimed at reaching new customers by embedding its services in apps they already use, a senior executive told Semafor.
The strategy marks a pivot under group CEO Kenny Fihla. He hired Sitoyo Lopokoiyit, the former M-Pesa chief executive, to drive a shift in South Africa’s third largest bank, which, alongside rivals, is racing to secure the loyalty of young adults raised on mobile money and instant transfers.
“We need to meet them where they are,” Lopokoiyit, Absa’s chief executive for personal and private banking, said in an interview. “Gen Zs are digital natives, and Gen Alphas are AI natives. A billboard won’t work for them. Banking has become invisible.”
Lopokoiyit cited this month’s partnership with EasyEquities, which embeds South Africa’s top retailing investing platform inside the Absa banking app, as a flagship example of the strategy. The deal gives EasyEquities access to Absa’s 12 million retail clients while ensuring customer deposits and investment liquidity stay retained inside Absa, Lopokoiyit said.
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Absa has spent years trailing its domestic peers operationally and on the Johannesburg Stock Exchange. A revolving door in the C-suite — marked by seven CEOs in as many years following Maria Ramos’ departure in 2019 — disrupted continuity and dragged execution. While competitors such as Standard Bank, FirstRand, and Capitec compounded earnings and expanded market valuations, Absa suffered from sluggish topline growth and lagging return on equity that made it the worst performing of South Africa’s biggest four lenders just before Fihla took over.
Fihla, who took the helm a year ago, has spent his early tenure overhauling the executive team and stabilizing the leadership.
Lopokoiyit is confident that there is still room for growth in South Africa, saying Africa’s biggest economy, where the four big banks dominate a market that generates a combined $2 trillion in profit, has lots of “white spaces”. He pointed to long lines at ATMs and cash-dominated township economies as easy targets for digital payments.
He said Absa is about to roll out a new payment tool connecting personal accounts directly to small township businesses, aiming to replace cash with digital transfers. He declined to give additional details ahead of the launch.
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The payments strategy dovetails with the reforms by the South African Reserve Bank, which is letting non-bank companies plug into the national payment system.
The policy changes erode the old fees incumbents used to collect when they were the only ones plugged in, but it also creates opportunities for incumbents, Sitoyo said.
Notable
- Absa reported an 8% increase to a record 12.8 billion rand ($796 million) in first half earnings.