With the ground still shifting, those who choose to remain in the banking sector are going to require a good sense of balance.
By Maite Barón, CEO, The Corporate Escape™
No sector of the economy can resist change forever, and any immunity that used to come with size is long gone.
The downturn we have just experienced has led to a substantial restructuring of the banking and finance sector, as corporate organisations have sought ways to ‘rebalance’ their investment in resources and personnel. Inevitably, one of the headline consequences is the wholesale loss of banking jobs. According to Switzerland-based global financial union UNI Finance, this adds up to 193,000 fewer jobs over the last two years in the 26 countries where it has a presence.
And these figures pre-date Lloyds’ and Barclays’ announcements of further job losses. Part state-owned Lloyds said last Tuesday that it will be cutting around 1,000 jobs as it pushes on with its three-year cost-cutting plan. Meanwhile, Barclays is set to cut 1,800 investment banking jobs, most of them expected to be at managing director level. And don’t forget Royal Bank of Scotland, which is planning to shrink its investment banking and international operations still further, including shedding up to 30,000 jobs.
What has happened since 2007/8 could be likened to an earthquake – pressure building up on a point of geological weakness, which is able to withstand the pressure for only so long before succumbing with a dramatic and sudden shift in the structural plates.
But, in fact, much smaller, incremental changes happen on a daily basis. Large businesses, given their size, often choose to ignore these, since constantly trying to adjust would be time-consuming, costly, and would create fundamental instability as the organisation sought to adapt.
And in any event, as a result of innate conservatism, the natural reaction is to put off making changes, however necessary they may be, for as long as possible. Sometimes for too long.
The blame for the recent failure of Lloyds’ ATM infrastructure was placed squarely on the shoulders of out of date or inadequate computer systems that have failed to keep up with the demands of an increasingly cashless society – a shifting undercurrent that either went unnoticed, or has been ignored.
That’s just one example. What other underlying trends are flying beneath the radar, but are likely to be instrumental in driving transformation?
The recent simplification of the bank account switching process is simply oiling the wheels of change for those upset and unsettled by breakdowns in service such as widespread ATM and website malfunctions. That alone could be the catalyst for sudden, large scale customer migration, leaving even the biggest names vulnerable and exposed. Add in concerns about out and out dishonesty, lack of support for small business, excessive pay and ethical opacity, and it’s little wonder there is growing momentum for switching to less mainstream, more transparent, accountable and customer-focused banking.
Even before that, changes in banking habits had already led to losses like the 1,700 jobs cut by Barclays as a consequence of the rise in online banking, meaning fewer customer-facing staff are required at branch level.
Clearly, large scale job losses are being driven by new technology and the rise of ‘big data’ – the wealth of digitised information now available for analysis. One 2013 Oxford University study suggests that 47% of today’s jobs could become automated over the next two decades, including those in the finance and legal arenas – echoing the ‘technological unemployment’ that doyen of economists John Maynard Keynes talked of in the 1930s.
That said, while making people redundant is one consequence of sector downsizing, the other size of the coin is that banks, along with other corporate organisations, may find it increasingly difficult to recruit high-quality employees in the first place. While graduates in decades gone by may have been lured through the doors by the promise of high salaries, big pensions, and career opportunities, these benefits have been eroded to the point where the corporate world is far less attractive than it once was.
Not surprisingly, many ‘bright young things’ are heading for more dynamic and exciting businesses that are more in keeping with the zeitgeist.
Inadvertently perhaps, banks and other large organisations may also have empowered workers to move on, should they choose. One of the simplest and most effective ways for large enterprises to make themselves more flexible – leaner and meaner – is to hire freelance staff on a contract basis. Great for easing the payroll burden in hard times, but a two-edge sword that makes it easier for ‘employees’ to walk away. No pension? No strings.
For some, that means moving to another job, but for a growing number it means going in a new direction entirely, either to provide high-level consulting services using their knowledge and expertise, or to set up in business for themselves.
So that same low cost technology that’s leading to job losses is also creating previously unknown markets, where local businesses are now able to operate globally. So who can blame those with talent for increasingly turning their back on traditional employment and deciding to take their chances on going it alone?
Above all, working for yourself gives you the one thing that has been palpably lacking in the banking and finance sectors over the last few years, and that’s security – when you work for yourself, it’s you who holds your destiny in your hands, not someone else.
And with the British economy surging forward, with a predicted growth rate for 2014 of 2.4%, there may be many more looking to grab their piece of the entrepreneurial pie.
These and similar unsuspected undercurrents are constantly reshaping every business and its marketplace, ensuring that uncertainty is the only truth we can bank on.
At The Corporate Escape, 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 break free and find independence outside the corporate world as a business owner, go to TheCorporateEscape.com.
European shares end higher on strong earnings, positive data
By Sagarika Jaisinghani and Ambar Warrick
(Reuters) – Euro zone shares rose on Friday, marking a third week of gains, as data showed factory activity in February jumped to a three-year high, while upbeat quarterly earnings boosted confidence in a broader economic recovery.
The euro zone index was up 0.9%, with strong earnings from companies such as Acciona and Hermes brewing some optimism over an eventual economic recovery.
The pan-European STOXX 600 index rose 0.5%, as regional factory activity was seen reaching a three-year high on strong demand for manufactured goods at home and overseas.
Another reading showed the euro zone’s current account surplus widened in December on a rise in trade surplus and a narrower deficit in secondary income.
Still, the STOXX 600 marked small gains for the week, having dropped for the past three sessions as investor concern grew over rising inflation and a rocky COVID-19 vaccine rollout.
But basic resources stocks outpaced their peers this week with a 7% jump, as improving industrial activity across the globe drove up commodity prices.
“This week’s slightly adverse price action has all the hallmarks of a loss of momentum temporarily and not a structural turn,” said Jeffrey Halley, senior market analyst at OANDA.
“There is not a major central bank in the world thinking about taking their foot off the monetary spigot, except perhaps China. (Markets) will remain awash in zero percent central bank money through all of 2021 (and) a lot of that will head to the equity market.”
Minutes of the European Central Bank’s January meeting, released on Thursday, showed policymakers expressed fresh concerns over the euro’s strength but appeared relaxed over the recent rise in government bond yields.
The bank’s relaxed stance was justified by the euro zone economy requiring continued monetary and fiscal support, as evidenced by a contraction in the bloc’s dominant services industry in February.
The STOXX 600 has rebounded more than 50% since crashing to multi-year lows in March 2020, with hopes of a global economic rebound this year sparking demand for sectors such as energy, mining, banks and industrial goods.
London’s FTSE 100 lagged regional bourses on Friday due to a slump in January retail sales and as the pound jumped to its highest against the dollar in nearly three years. [.L] [GBP/]
French carmaker Renault tumbled more than 4% after posting a record annual loss of 8 billion euros ($9.68 billion), while food group Danone and German insurer Allianz rose following upbeat trading forecasts.
(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)
ECB plans closer scrutiny of bank boards
FRANKFURT (Reuters) – The European Central Bank plans to increase scrutiny of bank board directors and will take look more closely at diversity within management bodies, ECB supervisor Edouard Fernandez-Bollo said on Friday.
The ECB already examines the suitability of board candidates in a so-called fit and proper assessment, but rules across the 19 euro zone members vary, so the quality of these checks can be inconsistent.
The ECB plans to ask banks to undertake a suitability assessment before making appointments, and they will put greater emphasis on the candidates’ previous positions and the bank’s specific needs, Fernandez-Bollo said in a speech.
The supervisor also plans more detailed rules on how it will reassess board members once new information emerges, particularly in case of breaches related to anti-money laundering and financing of terrorism, Fernandez-Bollo added.
Fernandez-Bollo did not talk about enforcing diversity quotas, but he argued that diversity, including diversity in gender, backgrounds and experiences, improves efficiency and was thus crucial.
“Supervisors will consider furthermore all of the diversity-related aspects that are most relevant to enhancing the individual and collective leadership of boards,” he said.
“Diversity within a management body is therefore crucial … there is a lot of room for improvement in this area in European banks,” he said.
(Reporting by Balazs Koranyi, editing by Larry King)
Where are we with Open Banking, and should we be going further?
By Mitchel Lenson, Non-Executive Chairman, Exizent
Open Banking has the power to revolutionise the way we manage our money, but most (65%) consumers are still not aware of it, while many financial institutions continue to treat it as an obligation rather than an opportunity.
For Open Banking to truly reach its potential, consumers need to have more trust in its benefits. However, this will only happen if banks and other financial institutions start to embrace it, rather than simply accept it.
Covid-19 has proven to banks that digital banking and open finance innovation is not simply a ‘nice to have’. It is vital for their own survival. With so many challenger banks now coming into the market, many of whom have entirely digital models and therefore invest heavily in technology, banks are starting to become aware that if they don’t embrace it, they’ll get left behind.
So, fuelled by a mixture of competition and Covid-19, banks are starting to realise that Open Banking is not about giving away valuable data, but it is about collaborating with third party fintechs to explore the endless opportunities data sharing can bring – to all sides.
By making open finance easier for developers, banks can not only save time and money by improving their own services but help create useful solutions that add real value for their customers.
Open Banking for all?
There is one, yet untapped area of consumer finance that could be immeasurably improved by Open Banking, and that is estate administration.
Recent research from Which? found that many executors contend with delays, errors and poor knowledge from their banks during the probate process. Our own research shows that most legal professionals admit the process does not work as it should, and the time it takes to complete probate is unacceptable.
Like the Which? survey, we found that the main issue is the administration involved, with most legal professionals saying that the time it takes for financial institutions to get back to them with the information they need is the main cause of delays.
Given that the system is not working for consumers, something clearly needs to be done. The good news is that the technology and data is already available – we just need to harness it to create a better system.
That is why we are developing the first ever platform to connect executors, legal professionals, and financial institutions to create a better, quicker, and more secure probate experience for everyone.
Our first release of the platform – a bespoke cloud-based solution to enable legal services firms to integrate directly with financial institutions making information gathering and processing more straightforward – was released in 2020. We are now building on that foundation to accelerate our development work with financial institutions to deliver additional value for all sides.
We also see huge potential in working with banks to utilise the digital financial infrastructure, powered by Open Banking, to improve things even further. But there is one, fairly sizeable issue – currently, Open Banking consent ceases at the point of death.
Is it time for legislative change?
Open Banking is not as open as is should be for those who can give consent, so we are certainly some way off from Open Banking for the deceased. However, the more that banks acknowledge Open Banking and its potential and are prepared to collaborate with third party fintechs to develop better experiences for consumers, the more likely we are to get to a point where we can tap into that potential to improve things for the bereaved.
Many of the problems – highlighted by Which? – that consumers face when managing someone’s estate could be reduced significantly if open finance continued to apply to the deceased.
Open Banking provides a huge opportunity to speed-up and reduce friction for loved ones faced at some of the hardest moments of their lives, and there is a strong argument here for the current position to be reviewed to enable better access to a deceased person’s assets.
With our current platform, we are showing how technology is playing an incredibly significant role in dealing with the complex, tangled process that is probate and the potential of open finance in radically enhancing what we are already doing cannot be understated.
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