CEOs in the financial services sector are more optimistic about their growth prospects

Worldwide CEOs in the banking and capital markets sectors are optimistic about their growth prospects over the next three years, despite growing concerns over global economic growth. Although CEOs share a renewed sense of optimism about growth in banking capital markets, they recognise the challenges are large, the risk of disruption is real, and the pace of change is increasing.

Johannes Grosskopf, PwC Banking & Capital Markets Leader for Africa, says: “Globally the outlook for financial services is positive. But the rise of disrupters in the market, in particular from unexpected places, has prompted the need for financial services organisations to stay agile. As a result innovation and technology remains high up on the boardroom agenda.”

South Africa’s CEOs are contending with similar issues as their global counterparts, with the majority viewing over-regulation and the availability of key skills as barriers to business growth, according to PwC’s 18th Annual Global CEO Survey. The survey is based on interviews with 410 CEOs in the financial services sector (175 from banking and capital markets in 54 countries; 80 from insurance in 37 countries; and 155 from asset managers in 46 countries).

The findings form part of PwC’s African Financial Services Journal 2015, which addresses strategic, operational and technical issues that can potentially affect the sector’s future performance. PwC’s FS Journal also addresses, amongst other issues, how IFRS 9 requires not just a change in an accounting standard, but also a change in how credit risk is managed; executive remuneration in the financial services sector; building the future for the real estate industry across the African continent; the threat from cyber security criminals; digital transformation in banking and Solvency II and SAM.

A high 93% of banking and capital market CEOs see mobile technologies as critical, enabling the move from traditional branch-based models to seamless multichannel models, as consumers increasingly shift their activity to mobile devices. “Changes are challenging the business models of today’s banks, as we are seeing new entrants come into the market to compete with different areas of banking. Advancements in technology, a changing competitive landscape and evolving stakeholder attitudes and expectations are transforming financial services in Africa,” adds Grosskopf.

“Banking services are expected to increasingly migrate away from physical, tangible distribution into technology-enabled channels giving rise to many banks looking at the ‘branch of the future’.”  

Joint ventures, strategic alliances and informal collaborations are increasingly seen as an opportunity by banking and capital market CEOs to strengthen innovation and gain access to new customers and emerging technologies, especially as many banks are simplifying and refocusing themselves around a core set of products, customers and geographies.

Worldwide, insurance CEOs are seeing more opportunities in the industry than three years ago. “The fact that people have a longer life expectancy and have more wealth to protect presents insurers with an opportunity,” says Victor Muguto, Long-Term Insurance Leader for PwC Africa.

However, more than in other industries, over-regulation is seen as a disruptor. A high 91% of insurance CEOs see over-regulation as a threat to their growth prospects. With Solvency II now less than a year from going live and other regional and local changes, the challenge is how to minimise the upheaval and build the new requirements into a reliable and cost-efficient business as usual.

CEOs also see the limited availability of key skills as a threat to growth, and diversity is now recognised as a key way to enhance business performance, innovation and customer satisfaction.

Grosskopf concludes: “The transformation of the financial services sector is accelerating, creating opportunities for some and threats for others.

“Financial services firms need to be more effective in finding ways to change business models and processes, as well as develop necessary competitive capabilities if they want to sustain growth and keep pace with market expectations.”