The financial system is changing and banks will either embrace the latest financial technology, or they will disappear.
This is according to South African Reserve Bank Governor Lesetja Kganyago, who was speaking to Bruce Edwards in an IMF podcast.
Kganyago said that while banks will change, they will not be completely supplanted by new fintech companies.
Kganyago said there is already a move by banks to offer more digital services, like smartphone banking, and they are moving away from physical branches staffed by people.
While this move is encouraging, Kganyago said it is not good to see the cost savings associated with digital banking not passed on to consumers.
Kganyago bemoaned the fact that banks are using these savings to bolster profit rather than make banking cheaper for citizens.
Kganyago said a lot of banking now takes place through digital platforms, which raises the question as to why there is not a central bank-issued digital currency.
He said they are currently spending a lot of time at the Reserve Bank studying fintech, and trying to understand what central bank-issued digital currencies could mean.
Kganyago said that a benefit of a Reserve Bank-backed digital currency is that there is no need to estimate the number of coins and notes in circulation to predict demand.
Instead, the digital currency can be tracked in real time – which will make the Reserve Bank’s job easier.