It’s been an interesting start to the year. Falling oil prices, stock market dampening and China-led slowdown have kept us occupied while snowstorms, rains and floods do their thing. On the international stage, a few key themes seem to have been dominating Davos: while the year’s burning security, humanitarian and energy and political realities are discussed; so is the rapid pace of technological innovation and shifting perceptions.
Within the shift in market position between incumbents and the new competition is a scary theme for the future.
Jobs lost to software-based process innovation. The WEF Future of Jobs report talks about a loss of 7.1 million routine white collar office jobs with a gain in 2 million Computer, Mathematical, Architecture and Engineering related fields between 2015 – 2020.
I don’t know how much of this is in Financial services, which has already been shedding jobs in batches since 2008. Business cycle needs are being pushed further by technology-driven efficiency and consumer behaviour.
Trading floors, sales teams and connected back offices are being scaled back due to a combination of shifting market conditions, trading automation and wider marketplace access.
Brick and mortar banking is also under assault with mobile and internet banking taking over. There have been many articles signalling the end of the branch in developed markets and yet a few suggesting strong opportunities for reinvention. Yet, the ‘last-mile’ to drive up financial inclusion in emerging markets needs large numbers of new (two-footed) business correspondents and agents to open and manage new under-banked relationships. Anecdotally, compliance and risk related functions also seem to be on the up as regulations increase.
Rebalancing.
The establishment (banks) do a lot of things right and wrong. And as with anything over time, growing inefficiently has led to bloated, needless processes. Flows, which almost like artificial intelligence, tend to figure out ways to replicate themselves! Adding more people simply makes them stronger.
Whether financial services, health, or public services, procedures can beget more procedures and it’s important to reset every now and then without worsening the end service.
Financial service industry resets are being forced by multiple single-solution alternatives with faster, slicker or cheaper service levels. The ideas and slices come in waves and at bubble-like pace. While announcing accelerators, venture funds and a few partnerships, financial institutions have taken time to respond. Many big players have joined consortia to study the blockchain, but by and large, I think most banks are still studying the various flavours of innovation to see what fits their specific context and the skillsets of their staff.
This will translate in the end to better propositions to the end consumers. But during this change cycle, it’s people within the financial services industry that are affected. Many banking administration staff are feeling the pressure and have to do less with more. A conversation with a few folks in my bank’s branches (a story for a separate post) drove home the point that processes involving people need time to catch up with and improve upon technology-driven innovation.
Banking relationships live and breathe and simply adding convenience and digital interfaces only solves today’s itch. Data analytics to provide insights and triggers; the convenience of mobile and web for the routine stuff; and dialogue with real people for the rest.
If we do it right, it will become rebalancing rather than loss.