- “There is going to be digitization of the workforce in a way we have never seen before. In 10 years, probably less, we will have substantially fewer employees, and the ones we do have will be significantly different from what we have now”.—Director, Bank Governance Leadership Network,
- This article was first published in March 2021. It is still very relevant.
Are Bankers at a crossroad? I believe so. The turbulence in the banking industry has not really settled after the financial meltdown in 2008 in USA, Europe and other advanced countries.
Between 2016 to 2018, Ghana also witnessed another financial crises as many financial institutions collapsed when Bank of Ghana implemented a sanitization exercise.
Despite the shut downs, many of the remaining banks are sill beleaguered with issues around re-capitalization, capital adequacy, new Directives from bank of Ghana on corporate governance, costs of restructuring of staff, thin margins, high levels of customer expectations, legacy technology, competition from telcos and fintechs, and so on.
What is a crossroad?
- At a place where two roads meet and cross each other.
- At a critical juncture or turning point.
- A point at which a crucial decision must be made which will have far-reaching consequences.
Who are the stakeholders of banks? (Board, shareholders, management and staff, customers, Govt, the public/community)
What are the sources of Bankers’ crossroads?
- Internal factors
- External factors.
The above quote at the beginning of this presentation, was made during a meeting of Bank Governance Leadership Network, (BGLN)’s meeting in March 2018. The discussion on the future of talent in banking, and workforce evolution in the digital era was to send signals to all bankers to believe in the need for a change of mindset to adapt to this paradigm shift in banking. At this meeting, various key issues emerged:
- Technology and broader trends are reshaping bank workforces.
- Banks are in the early stages of planning for workforce transformation
- Talent strategy has become a critical issue for boards
This presentation is not to scare you but rather create an awareness among bankers as individuals, as well as banks as a corporate body, of the need for a change of mindset in this digital transformation in banking.
Banking has undergone several metamorphoses over the centuries. Originally starting with the generic function of collecting deposits for safety and giving loans to make a margin, banking has grown into a whole new paradigm shift. Using the Act 930, the SDI issued in 2016, there are several permissible activities that banks are licenced to perform, as stated below:
“A BANK OR SPECIALIZED DEPOSIT-TAKING INSTITUTION SHALL NOT CARRY ON A BUSINESS OTHER THAN ANY OF THE FOLLOWING:
(a) acceptance of deposits and other repayable funds from the public;
(c) financial leasing;
(d) investment in financial securities;
(e) money transmission services;
(f) issuing and administering of means of payment including credit cards, Travellers cheques, bankers’ drafts and electronic money;
(g) guarantees and commitments;
(h) trading for own account or for account of customers in:
(i) money market instruments, (eg T/Bills <12 mths),
(ii) foreign exchange, or
(iii) transferable securities; (CDs)
(i) participation in securities issues and provision of services related to those issues;
(j) advice to undertakings on capital structure, acquisition and merger of undertaking;
(k) portfolio management and advice;
(l) keeping and administration of securities;
(m) credit reference services;
(n) safe custody of valuables;
(o) electronic banking;
(p) payment and collection services;
(r) non-interest banking services; and
(s) any other services that the Bank of Ghana may determine.”
This is a tall order so why am I saying that bankers have reached a crossroad?
Contemporary Banking Issues
- Reduction in brick and mortar banking, and an increase in electronic banking transactions.
- Increased collaboration between banks/telecommunication companies and fintechs to develop products for the convenience of customers.
- Intense focus among banks on customer care because customers have a wider choice.
- Introduction of digital banking.
- The Fourth Industrial Revolution engineered by Artificial Intelligence (AI).
- Reduction in front-line staff from Tellers to Sellers and Personal Bankers.
- Most back-office transactions are digitized and the big data have all been converted into digitized processes using of Robotic Process Automation
The Move from Traditional to Digital Banking
Let us examine the key differences that have emerged with the current move from traditional to digital banking.
Features of traditional banking:
- A sellers’ market
- Little competition due to monopoly of big state banks and few foreign/global banks
- Customers had little choice
- Tall hierarchical structures
- Mainly manual operations, causing slower decision-making
- Focused on fiduciary relationship
- Facial interaction
- Trust was paramount.
- Bankers were very highly regarded by the public.
- Job security for staff
Features of Digital Banking:
- A buyers’ market.
- Increased foreign participation in banking
- Due to competition, customers decide on what is best for them.
- Increased focus on the customers’ experience and convenience.
- Flatter organizational structure with faster decision-making
- Automation and digitization, causing faster and more accurate processing of transactions
- lower staff strengths
- Less physical interaction with customers
- Recent financial crises have reduced public trust for bankers.
- Loss of jobs
- Competition from telcos and fintechs.
- No jobs for life
The FinTech Revolution – The Global Outlook
The fintech revolution started after the financial meltdown in 2008, when banks concentrated on restructuring to meet regulatory sanctions. During this time, the Fintehs took over the banking space, using A1, robotic automation, etc to provide services and products previously offered by banks. The advent of smartphones, whatsup, we-chat, face-book, Amazon have created funds-transfer products to aid e-commerce. Robo-advisors have taken over the fund management space. FinTechs are now handling the more profitable front-end financial services with banks now handling settlements, reconciliation, compliance etc. Fintechs are enhancing financial inclusion without the need for bank account opening.
With the disappearance of some bank jobs, there is also a prediction of 50% bank job losses in the next 5 years. New jobs are also being created with new skill sets. E.g. creative designers and programmers.
The fourth industrial revolution has been described as disruptive. It has been heavily assisted by the use of artificial intelligence,(AI) robotic process automation. (RPA). On the whole there have been winners as well as losers.
Digitization has actually demystified the banking process to the extent that one does not need to have a bank account. Payment systems have become faster and easier to undertake. Money transfer activities have far over-run the usage of cheques, causing countries like Namibia and South Africa to stop its usage altogether, as a means of payment. In 2020, Ghana launched the use of the universal QR payment system.
As I watched it being shown on television, I knew that was a moment of truth for the payment system in Ghana. The significance of the launch by Ghana’s Vice President, Dr Bawumia buying “waakye” a local rice dish from a prominent seller at her local eatery, told Ghanaians that the time has reached for the ordinary citizen to be financially inclusive, without necessarily having a bank account!
This is a real crossroad for bankers. I shall continue on the various crossroads and recommendations about what bankers as well as banks themselves need to watch out for, next week.
TO BE CONTINUED
I will pause here. I wish you good experiences on your digital banking journey. For more insights please book a copy of my new book, “THE MODERN BRANCH MANAGER’S COMPANION” which involves the adoption of a multi-disciplinary approach in the practice of today’s branch management. It also shares invaluable insights on the mindset needed to navigate and make a difference in the changing dynamics of the banking industry. Call 0244333051 for your copy.
ABOUT THE AUTHOR
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of two books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story”. She uses her experience and practical case studies, training young bankers in operational risk management, sales, customer service, banking operations and fraud.