The former CEO of Barclays, Antony Jenkins, recently spoke in various media interviews about the global banking industry facing an ‘Uber moment’ in the near future. Jenkins warned that traditional bank headcount could shrink by 50% and profits on services by as much as 60%.
The reason? Financial Technology, better known in the industry as fintech, changing the way that banking services are delivered and allowing new market entrants to entirely change the game.
Jenkins said: “In my view only a few [incumbent banks] will have the courage and decisiveness to win in this new field.”
Jenkins was fired from Barclays in a disagreement over the scale and pace of change required in that company. Some might consider that he has an axe to grind, but his comments are representative of the whole market and not centred on any single organisation. There are already some interesting numbers when you look at the industry as a whole – Business Insider magazine has already declared that the ‘Uber moment’ is happening now.
Analysis by the Financial Times shows that of the big 11 European and US banks, headcount has been cut by 10% this year – that’s around 100,000 jobs.
Banking analyst Jon Peace, from Nomura, explained to the FT: “Digital transformation could also be a driver of further headcount reduction longer term, with retail banks cutting branches in favour of online services and investment banks cutting back offices in favour of online technologies such as blockchain.”
Business Insider is not sure if this is the single most important factor in the headcount reduction. They cite the extremely low interest rates in most developed markets, which has reduced client activity, and the increased regulatory burden.
What is clear is that customer behaviour is changing and the banks must change also if they are to maintain the network of physical and technology to cope with the new demands. Those of you that use Uber will know all too well that sometimes you need to converse with a person rather than use an app and herein lies the challenge to the banking industry…. How do you deliver both experiences without incurring more costs?
I believe that it is too early to connect recent job losses solely to the growth of fintech, but the analysts and Jenkins are right in pointing out that this could be a game changer for the industry. Banking is facing an Uber moment, but the big unknown is how the banks will react. They know the challenge that they face. If they can react and use the same technologies to improve the way they deliver services then the apocalyptic predictions may never come to pass. Will they react fast enough to what customers are demanding? Only time will tell….
What do you think about the Uber moment for banking? Leave a comment here or get in touch via my LinkedIn.
Photo by George Rex licensed under Creative Commons.