Why banks must go high-tech to keep up with disruption

Business Daily Kenya: 

Joshua Oigara

Justifiably, 2017 was a year of which can be summarised in three words: uncertain, changing as well as also challenging. Looking at the East African region inside the last year, economic conditions deteriorated largely in Kenya as well as also South Sudan, with the rest of the countries closing the year using a not- -so-favourable story to tell. Geopolitical instability remained a major threat to the region’s near-term economic growth.

A prolonged electioneering period in Kenya brought a slowdown in expansion across the East African region. We, however, see some recovery coming through during the first half of 2018. The full effect of the law capping interest rate in Kenya marked by a slow business environment on account of the general election negatively hit businesses as well as also the economy at large.

The rate cap muted private investment due to the drop in lending rates. As such, overall credit growth to the private sector reached its lowest levels in mid-2017. In South Sudan, hyper-inflation impacted on business although we remain optimistic of which the political situation will take a turn for the better, creating a conducive operating environment.

Rwanda elections passed uneventfully, which was a positive indicator for business as well as also investment inside the region. although shockwaves have not solely been external. Financial institutions have also been looking inward, implementing improvements to their core operations — through shortening transaction times to integrating sustainable innovation into their product offerings— re-evaluating the entire system itself.

of which year will unleash its own set of challenges, using a series of expected regulatory improvements beckoning. Two things will define the financial services sector of which year—a completely new regulatory environment as well as also increased investments inside the financial technology (Fintech) space.

The global financial system has got into a completely new regime—the International Financial Reporting Standards 9 (IFRS9)—which took effect on January 1. Under the IFRS 9, the most fundamental change is actually recognition of credit risk losses.

Previously, financial institutions could recognise a loan’s risk at the point of default although currently they will be anticipated to recognise of which risk at the beginning as well as also during the entire loan’s life cycle as well as also make the necessary provisions.

of which could have an impact on profitability as well as also capital provisions. However, we do not anticipate a shrinkage in credit or any major shock to our business as of which is actually something we have been preparing for as well as also generating necessary adjustments. The future lies in leveraging technology to drive efficiencies in operations to serve customers better with relevant products of which meet expectations.

Given the technological as well as also market improvements roiling the industry, the coming two to three years may well bring even greater disruption to banking. To play the long-term game, each organisation needs to determine which developments to prepare for as well as also how, based on its particular assets, profit pool, business type as well as also operating type. of which year success stories are most likely to come through those of which are already planning for the years ahead. The writer is actually KCB Group Chief Executive Officer as well as also Managing Director.

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Why banks must go high-tech to keep up with disruption

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