For almost four years, the Monthly Financial Sector Bulletin (MFSB), has been monitoring new product initiatives in the financial sector.
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In addition to aggregating and distributing general financial sector content for the convenience of its subscribers, the bulletin monitors product launches, promotions, enhancements and relaunches.
In this instalment, the focus is once again on product and channel development initiatives in the first half of 2017 (H1 2017).
Product Development by type
H1 2017 saw 41 initiatives being introduced; down by 24% from the 54 recorded during the same period in 2016. The outturn of initiatives comprised of 18 product launches, 17 product promotions, five product enhancements and a single product relaunch.
Clearly, there was a general reduction in activity across all types of initiatives and below is a comparative summary of products launched in first half of 2016 and H1 2017.
Initiative: H1 2016 H1 17 Product launches 28 18 Product promotions 20 17 Product enhancements 6 5 Product relaunches 0 1 Totals 54 41
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The decline in product development and promotional activities is consistent with a worsening operating environment which tends to stifle innovation as companies focus more on value preservation than on expansion or growth.
However, the missed opportunity is that of vigorously reconfiguring products and delivery channels in order to counter the cash shortages and maintain market share in the “new normal” instead of waiting for the situation to get better.
Product development by sub-sector
Sectorally, the product development initiatives were contributed by the banking sector (26), telecommunications or Telco sector (7), insurance sector (4) non-bank retail sector (1), non-bank other (1) micro-finance sector (1) and the money transfer sector (1).
In the banking sector, which accounted for 63% of activity, transaction banking was the dominant category, followed by mobile money services and card products.
This profile of product development is in line with the prevailing conditions in the market which are characterised by cash and foreign currency shortages and have necessitated greater focus on innovation in the transaction banking space and a shift in activity to alternative platforms such as mobile and online.
Channel development
A total of 32 channel development initiatives were recorded during the first half of 2017, compared to 44 recorded during the same period in 2016. Of the 32, the overwhelming majority (24) were still from the banking sector, of which over half (14) had something to do with the physical bank branch (either a new branch opening, a branch relocation or branch renovation/expansion).
This shows that despite the emergence of alternative channels such as mobile, Internet and agent banking, the reality is that much of the transactional activity is still taking place in or around the physical branch.
During the period under review, CABS and CBZ Holdings had the highest number of initiatives followed by the likes of National Building Society and Standard Chartered Bank.
Monthly distribution
The chart below presents the monthly statistics for both product innovation and channel development initiatives during the first half of the year.
Just like in H1 2016, channel development started the year on a high while product development was off to a slow start possibly due to the traditional festive season lull, but there was a quick reversal of fortunes by February with product innovation rising to a high of 13 in April before falling precipitously to four in June.
Channel development initiatives, which had fallen to a low of two started to rise in May and had hit nine by June.
The fall in new product initiatives was not typical of the half year-end period during which market players tend to scramble to introduce as many new initiatives as possible in order to positively influence the interim financial reports. The decline was, however, offset by the increase in channel development initiatives.
For the period under review, the trend lines reveal an inverse relationship whereby product development initiatives are at their highest when channel development initiatives are at their lowest and vice versa.
This suggests that market players tend not to spend money on both initiatives at the same time and that product development typically precedes channel development.
You don’t start by develop the channel, you start by developing the product, seems to be the message.
