Banking On A Job?

The banks are making headline news again. And it's not positive news either.

If it's not the ongoing repercussions of the credit fallout, then it's taking the blame for the new recession - double dip or not - or the fact the banks are not lending enough to small businesses (traditionally high risk businesses), or not making enough money for their shareholders, or paying themselves too much money  ... the list goes on and on. Bank bashing, particularly by the media and the politicians has become a regular feature of our lives, and the banks just don't know how to deal with the bad PR.

And sharing the banking bad news this time around has been current job losses, although I think in some cases this has been conveniently misinterpreted in the media.

As regards the present, for example, the prospects for some bank employees is admittedly bleak - but media suggestions that a bank here or there is shedding anything from 10 - 30,000 jobs jobs often disguises the fact that the businesses are being sold - and in a lot of cases the new owners will retain many of the jobs. Therefore jobs are not actually being lost or done away with, and the reality is not as bleak as the headline. But as usual it is the headline that catches the eye.

But current changes aside, and providing further news headlines to come, what of the future job market in the commercial banks in particular? Certainly an  area of focus for me.

After the re-sizing of banks, driven by the market in response to shareholder demands for better results, profits and therefore dividends, and perhaps in part by the regulators -  whether at the behest of politicians or not - banks are once again looking more critically at the manner in which they deliver their services. And it is here, in the personal banking market, that I do see the bigger changes taking place. As a result, jobs will either be created in different areas of the bank or, worse, will not be created at all. Which will prolong the negative press.

The provision of basic banking services, offered through a network of staffed bank branches, is very likely to change over the coming decade and it is going to happen in two ways particularly. One is through the rise of these same services being offered through non-banks, and the second is through technology - a long promised  change- agent in banking.

In the case of non-banks, you can already see the changes taking place in some countries; some more quickly than others. It is a common feature of many larger stores in some countries to offer their customers "cash back". A phenomenon where when you buy your groceries, which come to say USD70, the store will ask if you want cash as well on your charge card? Say another $30, or perhaps more depending on limits. Saves the customer having to leave the store and go to a cash machine, or a branch of their bank, and helps the store reduce the level of idle cash it has lying around the premises. Simple for all. Or stores themselves running card programmes where you get rewarded for the amount of goods you buy in their store - or indeed in linked stores. Why would you want a bank card (and okay, so the banks are often silently behind the cards) - you don't need one. The non-banks, who will also offer insurance products and investment products and foreign currency services as they do already, will be able to deal with all your needs while you are out shopping - and remember too, they are often open for many more hours than the banks. 

So when was the last time you had to go into a bank branch?

And then there's technology.

Some time in the early 1970s before Giscard d'Estaing became President of France, and was Finance Minister, he warned of huge job losses in the banking industry as technology in banking took a hold. He was on the right track, but a little premature perhaps. Whilst technology from that time onwards certainly increased in usage, it actually enabled banks to do more - and offer more to their customers. As the world became wealthier and more people wanted to do banking, banks were able to accommodate their wishes. And with the repeal of Glass Steagall this became an even greater opportunity for the banks. So in its early days, technology actually benefitted the Banks and their customers. But not all customers! Many older customers were unhappy about using technology. Cash machines were alien to them and they didn't want to trust the fact that they could key in a number and money would come from a hole in the wall.

But fast forward to today, and we are very rapidly approaching global populations who are very comfortable with technology. People who remember pin numbers, who order on the internet, who do not need to go to a bank branch and interact with a human being. A generation that doesn't want to have land lines but are happy with only mobile phones - many more of which are being embedded with secure chips that will let you transact through your mobile - and pay for your newspaper, and your taxi and train.

So branch banks will become a thing of the past - with perhaps one main branch in a region that will have a pool of experts in mortgages and other loans, in asset management and other major bank services. Centres of excellence in other words, providing service. And yes, they will need to be manned by high-quality people - but the overall numbers needed are going to drop.

After all, what could be easier than picking up cash with your cabbage or insuring your car when you go for an ice cream - and getting a rebate for your next visit to the supermarket.

Banks should be thinking about it now! 

 

Comments

[David Eldon]

Thank you for the comment, and the confirmation. In fact HSBC started doing this even earlier than you mention, with trials being run in Malaysia in the late 1980s early 1990s when I was there. However, while banks like HSBC may be at the forefront of technology, which Asia Pacific is well positioned to capitalise upon, my "warnings" are more directed towards the West, and to the less developed banks in the East, where I believe the dangers really lie if they don't keep up.

[zzachary]

HSBC embarked on turning branches to sales outlet in 2004/2005 across Asia Pacific. Branch remodelling was pursued and korean/japanese branch sales model served as the model of the future banking....now mobile banking...the technology you mentioned are being pursued in countries where technology accptance is high....to be fair...banks have been thinking about this for awhile now...HSBC being one of them...