Article: Technological shifts and the Banking Sector

Technology

Technological shifts and the Banking Sector

With changing technology comes the need to adapt and evolve. How have our banks kept pace with the improving way of work, and at what cost?
Technological shifts and the Banking Sector

Technological advancements have over the years led to the creation a far more complex, yet integrated economy. An economy where sectors, although different in their compositions and products, are usually impacted in a similar manner by the changes that happen in the external ecosystem. A system of operation and product delivery, all built on the same base. A base when toiled with sends the entire structure above it shaking. 

The current rage of technological adaption within businesses plays a similar role. Most companies are set to operate at an equilibrium when technological levels are stable and day to day functioning is well tuned to it. But most such ideal cases happen only in the long run. In the short run, technology is an ever-evolving entity and its rapid change has rattled many industries in the past couple of years. As business process change to keep up, many have speculated a strong overall negative effect on the jobs market.  According to a research by PeopleStrong, a quarter of people losing their jobs because of automation by 2021 will be from India.

The report goes on to add that many of the service sectors industries like the Information technology (IT), IT-enabled services (ITeS) and security services, followed by banking, will be the first sectors to feel the heat, wherein manual transactions and processing jobs will become obsolete. The year has already witnessed significant layoffs within the IT sector with many companies heading the route of technological transformations; automation programs are slowly becoming necessary to maintain profit margins. Even among those still employed, many are in need of reskilling in order to remain at par with the changing nature of work.

But as noted earlier, such changes aren’t just limited to IT sector. By the looks of it, the banking sector might soon follow.  

While the private sector banks were initially affected by it, now even the labour intensive public sector banks are no longer immune to the effects of newer technology.  

State Bank of India, for example, has claimed that there could be significant job cuts due to technological spending this year. SBI Chairman Rajnish Kumar in a report said that the public sector bank is likely to end the fiscal year with a smaller workforce than what it began the year with. Kumar said, “When you have such a vast and diverse client base as SBI, the need for the human interface will always be there. But, if you ask me, it (employee count) was 278,000 at the beginning of this year, will it remain 278,000? It is unlikely.” A closer look reveals two major factor driving this change within the banking sector today.

The changing nature of work 

An Economic times report  noted that in the duration of one year between September 2016 and September 2017, HDFC Bank’s workforce dipped from 95,002 to 86,543. The bank claimed that the September 2016 figure was a peak and the bank had cut its workforce in later quarters. Additionally, in September this year, Yes Bank reportedly let go around 2,500 people, which accounted for more than 10 percent of its workforce. Although the banks cited reasons such as redundancies, poor performance and the result of digitisation, technological change has been a strong driver of such change. 

What is key here to notes is that there has been a gradual shift in the nature of work within the Indian banking industry. The transition from people-driven processes to machines controlled ones in the past few years. The technological development, which has made banking easier, has also led to a slowdown in the hiring of staff at banks. “Although there have been hirings, the nature of skill sets required is changing with a lot more focus on the front-end talent” the report noted. 

As more number of ‘low-end back office’ jobs like manual data entry become obsolete, the sectors ability to create more jobs will significantly be affected in the coming years. This is further compounded by the fact that many of the employees are redeployed across functions. Positions, where the bank would've hired, are being taken up by such redeployment of the workforce . 

Evolving consumer preference 

On the demand side, consumer preferences have also been evolving. To remain competitive, financial services organizations are slowly realising and adapting to the fact that the customer base they serve is also going through a major shift in terms of buying behaviors and preferences, much of which is being driven by the digital technology revolution. A Capgemini report  notes that Generation Y, for example, wants more choice and control in how they interact with a bank or insurance company, whether it be self-directed, internet-led, person-to-person, on the phone or in an office. As such, companies must transform their traditional models and products and service delivery to meet the needs of this growing and changing customer. 

This shift has meant that many financial companies including banks have had to change their talent requirements accordingly. And the process is still on. The major role that analytics has played in enabling banks to perform things like past trend analysis, predictive analysis and real-time decision-making means that banks would require more skilled labour than what it currently has to deliver the best services. This along with technologies like the Internet of Things (IoT) and cloud-based solutions, banks today face the need to up their services to offer a variety of service offerings to their customer base. Analytics and artificial intelligence are already being used by banks to do jobs once considered sacred, like underwriting loans. What this means is that human skills, which were considered imperative for basic banking not long ago, may not be required in the future. Such shifts in talent preference are bound to significantly impact the workforce in the coming days.

 While the impact of such factors is more visible in the private sector, public sector banks would soon have to follow the suit. With the merger of the various State Banks almost over, there have been reports  of a reduced headcount within SBI due to retirement and VRS, and a plan of redeploying over 10,000 employees to its associate banks due to digitization. But the process of digital and technological transformation and its impact on the workforce of one the largest employers have just begun. 

Topics: Technology

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