Financial innovation in retail banking in South Africa

Abstract

Innovation in general refers to an action to do something differently. Financial innovation, which embodies the topic of this research, has therefore the creation of financial products, services and/or systems in mind in order to satisfy the needs of customers and clients and ultimately to improve the financial performance of the enterprises concerned. As the requirements of customers and clients change continuously, financial innovations are important for the survival of enterprises. Capital investments to accommodate financial innovations should be considered very carefully as they will determine the business activities of an enterprise for many years. The objective of this research focuses on the improvement of financial decision-making by executive managers in retail banking when they are engaging in financial innovations. A literature study represented the start of this research to provide a proper basis for compiling the empirical study’s questionnaire. The empirical study consisted of an opinion survey where the three pillars of financial innovation were addressed, viz.: products and services innovation, organisational innovation and distribution channel innovation. The empirical study indicated amongst others the importance of these three pillars of financial innovations as perceived by eight of the largest banks in South Africa. Furthermore, the obstacles to financial innovations also received the necessary attention. The empirical results of this research should be valuable to countries which are classified as developing economies with emerging market economies, as South Africa is a member of this group.