The South African Post Office (SAPO), still not a bastion of good service, has come a long way from the dinosaur postal operator it was back in 1994. Today, SAPO has amalgamated the old homeland post offices, given bank accounts (and payment security) to social grant pensioners (paying out over R500 000 in 2010), enabled over 1,4 million South Africans to renew their motor vehicle licences last year and provides banking services to six million customers.
It has a fully-fledged logistics arm, something CIO Justin White says is a little-known fact, and presents an untapped opportunity for the Post Office, which has plans to turn it into an entity that can compete with the major players in the freight and cargo space, not just courier services. White needs to deliver on the Post Office Postbank vision first, however.
Says White: “The business is evolving away from the traditional provision of mail and mail-related services to being a business that has an immediate imperative to take its savings bank, which provides six million customers with savings accounts and debit cards, and unlock that and do something novel at the bottom end of the market.”
White’s brief is to build a fully-fledged retail bank. “We will leverage the existing network of 2 500 branches run by the Post Office, affiliates, correspondents and agents,” he says.
“This footprint dwarfs that of any of the bigger banks. If we can get those outlets to offer the same level of service offered by other banks, we’ll be the envy of the industry.”
But that’s easier said than done. White has a plan that includes taking things slowly, and revamping the Post Office’s back-end systems to enable the bank’s transition, as well as that of the logistics arm and, finally, a revamp of the mail itself once everything else has been completed. Here, White says, the Post Office sees opportunities in hybrid mail – physical and digital.
An iterative approach
White says the challenge now is how to take six million customers, serve them better, start lending to them and take primarily mobile technology to extend Postbank’s reach and offer services in rural areas.
“This will require a major overhaul of the systems used,” White says. “Most banks have revamped their core systems. Postbank currently has the Oracle suite, and the intent is to upgrade that capability to the most recent version of the Universal Banking Solution and avail ourselves of its lending models.”
Postbank currently offers savings, investment and transactional accounts (enabling debit card transactions, as well as debit and stop orders to be placed against the account).
The first new thing Postbank will offer is unsecured lending.
“Small personal loans,” says White, “which we will provide as an adjunct to the transactional offering. We need to make the transactional offering more flexible and provide equivalent capability on mobile so a person can acquire an account remotely. If you’re not near a branch or near the Post Office network, how do you transact? We need to provide that kind of extension to existing services.
“If we can get that right, providing broader access to a wider customer base, we can start taking on the big four seriously,” he states.
Postbank is working with technology partner Oracle, which has a reasonably mature in-branch offering in terms of what is deployed at the teller and how it works. “So if we implement the standard Oracle offering, we’ll have upgraded transactional functionality and pilot lending by the end of 2012 or early 2013. There is still an application process underway with the Registrar and Reserve Bank, and we’ve not yet seen the list of conditions that will be imposed on us – if onerous, these dates may drift,” White comments. “From a governance point of view, they don’t want to see the Postbank taking its deposit base and doing something that would prejudice or make the funds base risky. Wholesale opening of the lending gates is not envisaged. We need to go in quite carefully so that we build those credit credentials and corporate know-how. It will be a gradual process.”
As to how much growth White is expecting, he looks to Capitec (opening 100 000 accounts per month) and JD Group (with its large lending book) and says the Postbank will be using those organisations as a benchmark.
“There’s no reason we couldn’t look to acquiring 100 000 customers per month using branches and mobile technology,” he states. “We’re currently doing 40 000 per month anyway, and getting that up to where the established players are is an immediate target.”
The logistics and mail arms of the Post Office will have to wait until the bank is mostly complete before they get any attention. As White puts it: “Entertaining two major organisational rejuvenation exercises is a lot of risk to handle.”
The IT operations for the Post Office as a whole fall under White’s control and, as he notes, he needs to be careful not to take on too much.
Preparation, in terms of ensuring the department has the needed capacity to take on the Postbank project, has necessitated some rearrangement. Currently, IT is handled through a mix of inhouse and outsourced skills, and the organisation uses technology from all the major vendors – HP, IBM, Oracle and so on.
At present, White is looking at attracting capable people into senior structures.
“We’ve been looking and it’s proving quite a lure, the chance to get in at the ground floor with Postbank. I’ve been very surprised by the volume and level of public and private sector candidates interested.”
The next six months will see White getting “a formidable and talented team together, reaching agreement on the mix of inhouse skills and service providers and then getting the banking landed as quickly as possible.” All of this should keep him rather busy indeed.