Our banking sector is evolving. Rapidly. Owning to the tightening market conditions and new incoming competitors riding the technological wave are forcing existing banks, both large and small, to adopt newer ways of working. Today, traditional banking structures with their costly infrastructure of branches, regulatory capital and vast teams of employees face competition from new age, tech-based companies who are leveraging systems like machine learning, big data analytics and cloud computing to provide better banking and credit solutions to customers. With many ‘fintech’ startups coming up in the market globally, physical and branch based banking activities face the possibility of being significantly changed. The need to go down the route of digital and automation adoption for banks has also become a business imperative. A paper by McKinsey & Co. titled ‘Two Routes to Digital Success in Capital Markets’, states that investment banks that successfully adopt automated trading and other measures can increase profit by 30 percent.’
Along with usage of automation and machine learning algorithms, the access and the usage of the digital space is significantly responsible for banks to offer their services to customers. Cisco, the global networking giant in its report titled: “A roadmap to digital value in retail banking” estimates that digital innovation in retail banking will drive $405 billion in digital value at stake from 2015 to 2017. Digital Value at Stake is a measure of financial gain or loss based on two components: entirely new sources of revenue or savings derived from digital investments and innovations, and value shifting between players within industries based on how their respective digital capabilities equip them to steal value from rivals. As digital space becomes the next the frontier for banks to establish a more robust and dynamic relationship with the customers, one finds that the traditional banks to less agile towards the adoptions of the platform. This has created the space for fintech startups to come up and provide round the clock banking solutions which help ease consumer transactions.
Along with the changes in the economic system and new competitors coming into the fray, the sector is also witnessing an evolving consumer preference when it comes to usage of banking services. This is, in turn, shaping the course bank are bound to take to grow and improve bottom line performances. Responding to the need of changing consumer demands, banks are now moving away from operations oriented approach, with the current focus is shifting towards client services. Consumer preferences are evolving to reach a point where convenience and experience become important for any banking product or service to be successful. Thus, squeezed by low-interest rates, shrinking trading revenue, and nimbler technology-based competitors, banks are reshaping themselves to make themselves a digital company to cut costs and serve clients better.
The changes in the external conditions in the banking sector would soon force most banks to re-look their priorities. This makes the right talent shift within such institutions even more important.
What does this entail for workforce?
Highlighting the kind of transition banks would make in the light of automation and machine learning, the McKinsey & Co. report on digital adoption states “Banks taking the all-in route will end up with business models and economics that look very different from those they have today. On the sales and trading front, digital channels will become the default for transacting with clients. Coverage models will shift radically as banks ruthlessly examine every front-office routine and manual activity for its automation potential.” The impact of such automation can be felt most at the hub of financial trades in the western world; The Wall Street. Newer technologies are slowly but surely eliminating jobs that can be performed by ‘robo-advisors’, or better still by algorithms. For example, machine learning, which uses algorithms that can learn and make predictions from data, are used to automate trade reconciliation between counterparties. This has now led to new age companies hire coders and tech professionals who don’t necessarily come with the strong background in finance. And the traditional banks are slowly catching up
As banks in the Indian context redefine their business priorities, the talent pool that they look at accessing is bound to change. Such business transformations come with its set of ‘talent replacement’. One such example in the recent times comes from HDFC bank. In an effort to stay in tune with the changing consumer preferences, who are increasingly depending upon internet banking services, has decided to nearly halve the number of branches in India to 26 from the current 50 and turn its focus to retail banking through digital channels. “This move aims to position our RBWM (retail banking and wealth management) business for the future, with the right mix of digital versus physical branch distribution. Customer expectations are changing rapidly and we need to adapt accordingly,” Stuart Milne, group general manager and chief executive officer, HSBC India, said in the statement.
Such shifts make the role of HR professionals even more important in enabling the institution to undergo the desired change successfully. In an Accenture research, 61 percent of respondents leading digital change within their organization said the shortage of digital skills as a top challenge in digital transformation and are concerned about how they can attract and retain top digital talent. This makes it an imperative for all verticals within the HR function, the recruiters, the talent acquisition heads, the learning and development experts among others to work together in identifying new talent pools and re-skilling the existing workforce. The rate at which banks are able to transform, to be able to fend off incoming competition, will depend on upon the agility of its workforce. With relevant reskilling and understanding the right talent requirements to support transformation processes, HR professional can help reduce the number of individuals who end up losing their jobs as due such processes.