The Product Development Situation in 2017

The Product Development Situation in 2017

In December 2017, the Monthly Financial Sector Bulletin (MFSB), completed four years of uninterrupted monitoring of new product initiatives in the financial sector in Zimbabwe. In addition to aggregating general financial sector content for the convenience of its subscribers, the bulletin monitors product launches, promotions, enhancements and relaunches. We also rate and review some of these products in the MFSB when they achieve “Product of the Month” status. The full year to December 2017 (FY2017) saw 92 initiatives being introduced; a marginal increase of 2% from the 90 recorded in 2016.

Contribution by Type

The out-turn of initiatives comprised of 46 product launches (50%) 34 product promotions (37%), 10 product enhancements (11%) and 2 product re-launches. Comparatively speaking, on a year-to-year basis there were marginal declines in launches of new products and enhancements while product promotions went up by close to 10%. Below is a comparative summary of products launched in 2014, 2015, 2016, and 2017.

While in the past, the successive declines in new product launches over the years was consistent with a worsening operating environment which stifled innovation, there was a marginal improvement in the total number of initiatives in 2017. This could be seen as being in sync with better economic sentiment following the political developments that ushered in a new administration whose new policy thrust is expected to create a conducive environment for business.

Contribution by Category

In the top three, insurance weighed in with 21% of the activities, followed by transaction banking at 16% as well as mobile money and lending tied at 12%, accounting for a total of 61%. The robust performance of insurance could be the sector’s nascent response to the threat of disruptive technologies, demographic shifts and dramatic changes in consumer aspirations among others. This was also partly a result of growing competition in the funeral assurance sector, decidedly now a “Red Ocean” in which mainstream banks are increasingly interested. The equally strong charge of mobile money, transaction banking and plastic money continues to reflect the imperative to reconfigure transactions away from cash towards alternative payment channels such as mobile money and plastic money.

 Contribution by Sub-Sector

Sectorally, the initiatives were contributed by the banking sector (56), insurance sector (12), telecommunications or telco sector (14), non-bank retail sector (2), non-bank other (1) fintech (1) and microfinance sector (5).

Although the fintech sector has made inroads in the financial sector the worldover, local fintech activity continued to be depressed in terms of actual products brought to market. There are however indications that this belies the level of activity that is taking place behind the scenes and in the fullness of time; we can expect to see some interesting initiatives coming from this sector to disrupt incumbents in the banking sector. Most of the activity is below the radar because the regulatory environment is still not conducive enough. For instance during the period under review Bitcoin traded fairly actively in Zimbabwe and at a premium to its normal price in the international markets.  The cryptocurrency was seen by Zimbabweans as providing a solution to foreign currency shortages but the Reserve Bank warned against its use apparently because it is not yet regulated by them. However, while this may reduce its usage in the local market, this does not mean that people will not stop using it.

Monthly Distribution

For most of the year, product and channel development were generally depressed, particularly in the first half of the year, unlike in early 2016 when both were quite ebullient. As seen before, the two exhibited an inverse relationship whereby the former is at its highest when the latter is at its lowest and vice versa. This is because institutions tend not to focus on both initiatives at the same time since products must first be developed before focus on the channels through which they will be delivered.

Movers and Shakers

EcoCash, CABS and Steward Bank were the movers and shakers in product and channel development stakes as they took first, second and third positions respectively in both categories – a development that underlines the dominance of companies linked to Econet Wireless when it comes to innovation. Other institutions which weighed in with notable initiatives in the top five included NMB Bank Limited, POSB, Standard Chartered Bank and CBZ Holdings.

Outlook

Political developments in the country ushered in a new administration at the end of 2017 and we expect that this will improve the operating environment, particularly if the country holds free and fair elections in the next  five or so months. The reformist agenda of the new dispensation could in turn unlock investment into the country, improve liquidity and positively impact the level of innovation in the financial sector. We therefore expect to see an upsurge in product and channel development in 2018.