Fundamental shifts in other major sectors of the economy show that what is happening in banking is part of a global sea change that will require many to re-evaluate the way they think about their career and future employment.
By Maite Barón, CEO, The Corporate Escape™
History shows us that jobs in every sector change over time.
Science, technology and human behaviour all play a part in altering trades and professions to the point where first they become marginalised, then they disappear altogether.
Banking, like any other industry, is not immune to such influences. Over the last five or six years, structural change has rocked the sector, resulting in many, many thousands of redundancies, which even now are still going on.
When you work within a particular sector, it’s easy to see the world through the focus of one particular lens, and to believe that one day, somehow, things will return to normal, that what was before, will come again.
However, it’s often useful to get a fresh perspective on things by looking outside your “bubble” to see what’s happening in other professions, like architecture for instance.
Highly skilled and well trained, architects once did everything meticulously by hand at a drawing board. Then software came along to replace paper and pencil, and those who weren’t quick enough to make the transition to a computer-based model, were soon left behind. Now, despite the pickup in construction and the innovative application of new technologies, like using drones for aerial surveys, more and more architects are losing out as cheaper building systems do away with the need for bespoke services. Worse still, with many architects being forced out of larger firms by commercial pressure to cut costs, those setting up on their own face even tougher competition. Is architecture on the way to becoming a fringe profession?
In the automotive sector, cars are now built by robots, not people. And the development of disruptive technologies will soon enable small start-ups to leapfrog established giants. The arrival of autonomous vehicles like Google’s self-driving car and others driverless vehicles is a game changer. It offers new mobility to many and heralds the advent of accident-free roads, with a consequent knock-on effect for the insurance industry.
So change is happening everywhere fast, not just in banking.
In every corner of the world of work, significant shifts are occurring right across the globe. MGI Research, part of the McKinsey group, forecasts that worldwide 114 million full-time knowledge workers could be replaced by smart machines, and in banking, demand for online services has already led to the demise of many counter staff.
With the pace of change so rapid, we all need to rethink our ‘career’. No longer can we see it in terms of smooth linear progression, instead we need to think of it as a series of shorter ‘careersbursts’ that come to an end due to events and circumstances either in a particular industry or in the wider economy.
Careers will become a series of multiple paths, intertwining, crossing and running in parallel, which we can jump between if we choose, as long as we have the flexibility, willingness and range of skills to do so. That could mean many more opportunities, and a potentially far more rewarding life, but only if you are suitably equipped.
In fact, you need to start thinking of your career as a business, and be constantly on the look-out for ways to improve, revise and update your business model.
So if the old ways aren’t the way forward, what is?
- Accept that change is inevitable. And that it’s largely out of your hands, at least at a micro level. However, that doesn’t mean you can’t prepare for what might happen and be ready to react when it does.
- Technology is here to stay. It’s changing and shaping the employment picture very quickly and will continue to do so across all sectors, reinventing the way you think about work and what it means.
- On-going learning is the norm. If you adopt an intransigent belief that things will return to the way they were, you won’t have the mental and emotional flexibility to ‘roll with the punches’ going forward. That’s why the continual updating of skills is so important, if you are to stay current, let alone ahead of the curve, as a useful and valuable employee, or in fact, employable at all.
- Invest in yourself. However don’t focus exclusively on the skills and knowledge that are needed right now, think a couple of steps ahead. That way you won’t be equipping yourself with an ‘education’ that’s out of date before you’ve begun, like so many youngsters going to university today.
- Stay alert to changes within and beyond your sector. The signs may be small at first, but momentum can build fast, suddenly reaching a tipping point, after which events can unfold quickly, so be prepared to make rapid decisions. Read widely to find out where change might occur next, and think deeply about how this could affect you and what your response might be.
- Know when it’s time to move on. If you see ‘the writing on the wall’, don’t expend too much time or effort trying to stay in a sector that is telling you it doesn’t want you. Understand and accept that at any time there will always be others, better equipped through circumstance, events or pure chance, to progress where you can’t. Often it makes sense to simply get out of the game altogether and try another. Give yourself choices by taking the lead on change.
- Self-employment is the future for many more than are aware of it yet. Think seriously about self-employment or setting up your own in business, even if right now you have no intention of making the leap. Over your banking career you’ll have acquired not just a good understanding of business, but also technical knowledge that you can put to good effect for your own benefit. It may be time to turn what you know into a business.
Whatever you decide, in the constantly shifting world of work, the key is to make the switch while you’re still in charge.
At The Corporate Escape, developing entrepreneurial leaders and preparing professionals for success in a future world of work is our passion. You can start to retake control of your career by downloading our free guide – ‘7.5 Strategies to Thrive in Your Career or Business’.And for more valuable resources on how to prepare your transition from employee to business owner, go to TheCorporateEscape.com.
A quarter of banking customers noted an improvement in customer service over lockdown, research shows
SAS research reveals that banks offered an improved customer experience during lockdown
This represents some good news for banks in an extremely challenging time, with 59% of customers also saying they’d pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.
The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of banking customers using a digital service or app has grown by 11%, adding to an existing 58% who were already digital customers. Over half (53%) of new users plan to continue using these digital services permanently moving forward.
Brian Holden, Director, Financial Services at SAS UK & Ireland, said:
“It’s notable that in times of need customers value being able to communicate with their bank and place an even higher value on good customer service. A rise in the number of digital customers means banks can now reach a wider audience online, leveraging AI and analytics to offer a more personalised experience.
“There is work to be done, though. Even greater personalisation is needed if banks are to win over the 12% of customers who felt banking services deteriorated over lockdown. And this personalisation will need to get right down to a segment of one to properly reflect the unique circumstances some individuals now find themselves in due to the pandemic.”
While the number of digital users grew over lockdown, there is still a quarter (24%) of the banking customer base that have chosen not to make the switch to digital services.
Meanwhile, failure to offer a consistently satisfactory customer experience could prove costly for banks, with a third (33%) of customers claiming that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service, so this just underlines how much retail banks can win or lose in these difficult times.
For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer?
Swedish Bank Stress Tests in Line with Recent Rating Actions
The Swedish Financial Supervisory Authority’s (FSA) latest stress test results show major Swedish banks’ robust ability to absorb credit losses. The results support Fitch Ratings’ view that short-term risks have abated in recent months, and are in line with Fitch’s assessment of major Swedish banks’ capitalisation at ‘aa-‘, which was a factor when Fitch removed the ratings of Handelsbanken, Nordea (not covered by the FSA’s stress test) and SEB from Rating Watch Negative in September.
The FSA estimated about SEK130 billion of credit losses over 2020-2022 for the three largest banks (Swedbank, Handelsbanken and SEB) under its stress test. This represents about 220bp of their loans, or about 70bp annually. However, the banks’ pre-impairment profitability in the stress test could absorb credit losses of up to about 110bp of loans annually. Fitch’s baseline expectation is for credit losses below 20bp of loans in 2020 and 8bp-12bp in 2021.
Capital remained strong under the stress test. The average common equity Tier 1 (CET1) ratio fell by only 2.8pp (1.9pp if banks did not pay dividends) from 17.6% at end-June 2020. The capital decline was not driven by credit losses, which could be absorbed by pre-impairment profitability, but by risk-weighted asset inflation.
The three banks’ 3Q20 results showed that capital has been resilient despite the coronavirus crisis. The banks had a CET1 capital surplus over regulatory minimums, including buffers, of almost SEK100 billion (excluding about SEK33 billion earmarked for dividends). SEB had a CET1 ratio of 19.4% at end-September, Handelsbanken’s was 17.8% and Swedbank’s 16.8%.
The SEK130 billion credit losses under the latest stress test are lower than under the FSA’s spring 2020 stress test (SEK145 billion), which also covered a shorter period of two years. However, they are still larger than the actual losses incurred by the three banks during the 2008-2010 crisis. This is despite tightened underwriting standards by the three banks in recent years, including, in the case of SEB and Swedbank, in the Baltics, the source of most of their loan impairment charges in the previous crisis.
In its baseline economic forecasts, the FSA assumes a harsher shock to Sweden’s GDP in 2020 and 2021 (-6.9% and 1%, respectively) than Fitch’s baseline (-4% and 3.4%), although it assumes a similar recovery by end-2022. It also assumes real estate price corrections, which appears particularly conservative in light of a 11% housing property price increase over January to November 2020.
The ratings of Handelsbanken (AA), Nordea (AA-) and SEB (AA-) are on Negative Outlook due to medium-term risks to our baseline scenario. The rating of Swedbank (A+) is on Stable Outlook, reflecting significant headroom at the current rating level following a one-notch downgrade in April due to shortcomings in anti-money laundering risk controls.
Future success for banks will be driven by balancing physical and digital services
Digital acceleration due to COVID-19 has not eliminated the need for bank branches
Faster service (23%), smaller queues (26%) and longer opening hours (31%) are among customers’ biggest asks of their bank branch, new research from Diebold Nixdorf today reveals. But with 41% consumers saying they would be comfortable to engage with all banking services via an app, it is vital that banks respond to the full spectrum of customer needs – balancing and evolving their offerings on multiple fronts.
A third (35%) of customers say they will always want access to physical, in-branch banking services in some capacity and one in ten (10%) consumers will never bank predominantly online in the future. This demonstrates that there remains an important role for the services a branch provides. This role, however, continues to shift away from purely transactional banking:
A quarter (26%) value face-to-face advice when it comes to their banking needs
One in five (18%) seek advice on different products
17% want to speak to the staff or other customers.
Matt Phillips, Diebold Nixdorf vice president, head of financial services UK & Ireland, said: “The majority of banks have spent the last decade focusing on their digital strategies and investing in improving – or establishing – their online customer experience. However, the data shows that there is still an essential role for physical branches. Banks now increasingly face the challenge of continuing to provide customers with access to a range of physical and as well as digital services, giving them the flexibility to choose the best service for them at any given moment in time.”
When looking beyond the impact of COVID-19, planned branch visits by customers are expected to rebound to 28%, following a dip to 11% during lockdown. And when asked about the new services they’d like to see inside their bank, sixteen percent of respondents said more self-service machines would improve their in-branch experience.
Matt Phillips continues: “In a world that is fast evolving and where the future is digital, there’s no doubt that high street banks must, and are, responding to the needs of highly digital customers. But not every customer requirement is digital. There is still a strong need for physical bank branches and the interaction and services they offer, and striking this balance between physical and digital is where the industry must come together to provide solutions. For example, building a strong, leave-behind strategy is something we’re seeing across the board when banks have to close branches, ensuring customers have access to self-service machines to complete all their transactional needs.”
The Coming AI Revolution
By H.P Bunaes, CEO and founder of AI Powered Banking. There is a revolution in AI coming and it’s going...
Q&A with Joe Steele, Head of Workplace Technology at Starling Bank
In just under a year, many businesses had no choice but to go online and with digital transformation on the rise...
How financial services organisations are using data to underpin future growth
By John O’Keeffe, Director of Looker EMEA at Google Cloud In addition to the turmoil caused by the COVID-19 pandemic, a...
Three questions the financial services industry must answer in 2021
Xformative, a Mastercard Start Path recipient, shares what these questions mean for fintech partners and their innovations This year, fintechs...
A quarter of banking customers noted an improvement in customer service over lockdown, research shows
SAS research reveals that banks offered an improved customer experience during lockdown A quarter (27%) of banking customers noted an...
Is Digital Transformation the Key to Business Survival in the New World?
After a turbulent year, enterprises are returning to the prospect of a new world following an unprecedented pandemic. Around the...
Virtual communications: How to handle difficult workplace conversations online
Have potentially difficult conversation at work, like discussing a pay rise, explaining deadline delays or going through performance reviews are...
Black Friday payment data reveals rapid growth of ‘pay later’ methods like Klarna
Payment processor Mollie reveals the most popular payment methods for Black Friday Mollie, one of the fastest-growing payment service providers,...
Brand guidelines: the antidote to your business’ identity crisis
By Andrew Johnson, Creative Director and Co-Founder. How well do you really know your business? Do you know which derivative of your...
COVID-19 creates long and winding road for startups seeking investment
By Jayne Chan, Head of StartmeupHK, Invest Hong Kong Countless technology and other companies describe themselves as innovators, disruptors or...