Dig­i­tal bal­ance

Tech­nol­ogy is trans­form­ing the fi­nan­cial land­scape and mak­ing some jobs re­dun­dant but sys­tems and ser­vices still need the hu­man touch


Tech­nol­ogy is trans­form­ing the fi­nan­cial land­scape, mak­ing some jobs re­dun­dant, but some sys­tems and ser­vices still need hu­mans.

Amid the whirl­wind of change driven by the on­go­ing fi­nan­cial tech­nol­ogy (fin­tech) boom, con­cerns are grow­ing about the po­ten­tial for mas­sive lay­offs in fi­nan­cial in­sti­tu­tions. While these fears are not ground­less, the re­al­ity is that fi­nan­cial in­no­va­tion is not as big a job killer as many be­lieve.

With that said, there are al­ready places and ar­eas where tech­nol­ogy is do­ing away with old-fash­ioned man­ual la­bor. A case in point is the job of bank tell­ers, which could soon dis­ap­pear in places like Hong Kong or Sin­ga­pore in the next few years.

Mid­dle and back of­fice jobs are also on the line as more fi­nan­cial in­sti­tu­tions adopt new tech­nol­ogy as in­te­gral parts of their op­er­a­tions.

But while some worry about the po­ten­tial job losses that fin­tech may cause, oth­ers see a num­ber of pos­i­tive side ef­fects.

“Fin­tech for sure can have an im­pact on the job mar­ket, but we’ve had tech­nol­ogy for a long time and it hasn’t re­ally re­placed work­ers. What it has done is shift the jobs and changed what the jobs are like,” says Astrid Raetze, a part­ner at law firm Baker & McKen­zie.

“If fin­tech has an im­pact on the way peo­ple work, it should mean that we’ll have more time and en­joy life,” she says.

“Fin­tech is do­ing away with jobs that are mind-numb­ing for hu­mans. Ev­ery tech­nol­ogy needs peo­ple to man­age it,” says Jen­nifer Carver, chief in­for­ma­tion of­fi­cer at Nest, a Hong Kong-based startup in­cu­ba­tor.

“What fin­tech is do­ing is help­ing move peo­ple up the lad­der into po­si­tions that are more in­ter­est­ing and chal­leng­ing in­stead of do­ing mun­dane tasks that can be done elec­tron­i­cally,” says Carver.

The wave of tech­no­log­i­cal evo­lu­tion in trans­ac­tional ac­tiv­i­ties could ren­der many jobs re­dun­dant, much like what hap­pened dur­ing the in­dus­trial revo­lu­tion 150 years ago.

Cur­rently, some 60 to 70 per­cent of re­tail bank­ing em­ploy­ees do man­ual process-driven jobs but fin­tech could be an agent of change that leads to the elim­i­na­tion of those roles.

Af­ter all, al­most every­thing in the fi­nan­cial sec­tor is about trans­ac­tional ef­fi­ciency and banks that can de­liver trans­ac­tions quickly and ef­fi­ciently are set to win. Head­count re­duc­tion can hap­pen quickly for banks that lead in dig­i­ti­za­tion of data. In the United States in par­tic­u­lar, cus­tomers are in­creas­ingly be­ing served by fin­tech port­fo­lio-man­age­ment plat­forms that cut down on the need for fi­nan­cial ad­vis­ers and re­la­tion­ship man­agers. Two of these “robo ad­vi­sory” lead­ers, Bet­ter­ment and Wealth­front, have more than $2.6 bil­lion and $3 bil­lion in as­sets un­der man­age­ment, re­spec­tively. Ac­cord­ing to Dig­i­tal Dis­rup­tion, a re­cent re­port by Cit­i­group, the num­ber of tell­ers at US bank branches has de­clined 15 per­cent since its peak in 2007 and job losses could ac­cel­er­ate as more jobs are au­to­mated. Citi fur­ther pre­dicted that the fin­tech boom could lead to Euro­pean and US banks cut­ting about 1.7 mil­lion jobs by 2025, or around 30 per­cent of bank staff. For now, glob­ally speak­ing, lay­offs due to fin­tech will take time. While new peer-to-peer (P2P) lend­ing com­pa­nies have brought in a lot of ven­ture cap­i­tal, it still only ac­counts for 1 per­cent of global loans. Sim­i­larly, new busi­ness mod­els have dis­placed just 2 to 3 per­cent of con­sumer bank­ing rev­enues in the US and even less in cor­po­rate bank­ing. Nev­er­the­less, tech­no­log­i­cal dis­rup­tion lead­ing to job loss is a mat­ter of when, not if. “In­cum­bent fi­nan­cial in­sti­tu­tions still have the up­per hand in terms of scale and we have not yet reached the tip­ping point of dig­i­tal dis­rup­tion in ei­ther the US or Europe,” says Kath­leen Boyle, man­ag­ing ed­i­tor at Citi Global Per­spec­tives & So­lu­tions, in the re­port. “Given the growth in fin­tech in­vest­ment, this isn’t likely to con­tinue for long.”

Many of the con­cerns are con­fined to cer­tain re­gions in the world that al­ready have ro­bust bank­ing struc­tures but face the real need to in­no­vate, such as the US and Europe.

For the most part, ex­perts are not ter­ri­bly wor­ried about the job losses that fin­tech could cause in Asia-Pa­cific, in part be­cause the bank­ing in­dus­try in the re­gion is grow­ing and may even skip the en­tire process of hir­ing armies of tell­ers.

In­stead, most of the de­vel­op­ing Asian coun­tries have jumped straight into mo­bile tech­nol­ogy that en­ables has­sle­free pay­ments.

For coun­tries like China — with a large pop­u­la­tion with­out bank ac­counts and a bank­ing in­fra­struc­ture that is grow­ing quickly — this dig­i­tal leap means that fears of job losses due to tech­no­log­i­cal evo­lu­tion may be ir­rel­e­vant.

“Fin­tech is play­ing a key role in the de­vel­op­ment of fi­nan­cial ser­vices across Asia. Peo­ple want con­ve­nience at their fin­ger­tips and this in­cludes their fi­nan­cial trans­ac­tions and re­port­ing,” says Carver at Nest.

This is ev­i­denced by a tran­si­tion un­der­way in China from phys­i­cal to dig­i­tal fi­nan­cial flows, which has been “breath­tak­ing” with 96 per­cent of e-com­merce sales done with­out the in­volve­ment of a bank, ac­cord­ing to the Dig­i­tal Dis­rup­tion re­port.

China also has the largest P2P lend­ing mar­ket in the world, ac­cord­ing to the same re­port, which pointed out that “if we were to ex­trap­o­late the re­cent growth rate out to end2018, the Chi­nese P2P mar­ket would be about 9 per­cent of to­tal re­tail loans”.

Other Asian coun­tries also have large un­banked pop­u­la­tions. In­dia, In­done­sia and the Philip­pines alone have some 400 mil­lion peo­ple with­out bank ac­counts that could ben­e­fit from fin­tech. In the Philip­pines, for ex­am­ple, there are more peo­ple with Face­book ac­counts than bank ac­counts.

Mo­bile pay­ments could help these peo­ple ac­cess ba­sic fi­nan­cial ser­vices and pol­icy lead­ers in these coun­tries view fin­tech fa­vor­ably.

With the in­cred­i­bly high mo­bile pen­e­tra­tion rate in Asia, banks are quick to col­lab­o­rate with fin­tech com­pa­nies with­out the need to re­duce staff count.

“We are keep­ing more or less the same num­ber of staff. As a man­age­ment team we are try­ing to em­brace fin­tech. The ma­jor­ity of our staff re­ceive train­ing cour­ses — we are look­ing into do­ing things in a dif­fer­ent way,” says Glendy Chu, DBS Bank’s head of group strate­gic mar­ket­ing and com­mu­ni­ca­tion.

Carver says that many banks are work­ing with fin­tech star­tups to in­te­grate new tech­nolo­gies into their ex­ist­ing sys­tems to help im­prove their cus­tomer ex­pe­ri­ence.

“We are run­ning ac­cel­er­a­tor pro­grams with DBS in Hong Kong and OCBC in Sin­ga­pore to help them find those star­tups that are most suited to as­sist­ing the bank to be more ef­fi­cient in­ter­nally and pro­vide a bet­ter cus­tomer ex­pe­ri­ence ex­ter­nally,” she adds.

The DBS Ac­cel­er­a­tor is a joint ini­tia­tive that kicked off last Au­gust be­tween the Sin­ga­porean bank and Nest, the startup in­cu­ba­tor. The DBS Ac­cel­er­a­tor aims to re­shape bank­ing and fi­nance in Asia by se­lect­ing a pool of star­tups to work with the bank.

Last year, 10 star­tups par­tic­i­pated in the ini­tia­tive: To­fuPay, Cur­renxie, Apvera, Cred­itable, Dol­lar$mart, Monexo, Fund In­no­va­tion, Xfers, Closir and Su­per Fluid.

“We have cho­sen to ac­tively par­tic­i­pate in the cre­ation of the fin­tech ecosys­tem. The new com­pe­ti­tion is good for our in­dus­try and will ul­ti­mately help us to de­liver bet­ter ser­vice to our cus­tomers,” said Gigi Wong, man­ager at the mar­ket­ing and com­mu­ni­ca­tions de­part­ment of DBS.

“Star­tups need banks. Many of them seek to sell their fin­tech so­lu­tions to ex­ist­ing play­ers. Banks also need star­tups. There’s al­ways op­por­tu­nity that comes with any threat,” Wong says.

“We have been grow­ing the num­ber of de­vel­op­ers, data sci­en­tists and de­sign­ers at the bank. We’re run­ning hackathons, part­ner­ing with univer­si­ties,” she says. At a hackathon, pro­gram­mers col­lab­o­rate to cre­ate soft­ware or ap­pli­ca­tions.

“Parts of the bank feel more like a tech com­pany now,” Wong adds.

In the long run, although dig­i­tal dis­rup­tion is likely to cause some job losses, there are still ar­eas in fi­nance that need hu­man in­ter­ac­tion now and for the fore­see­able fu­ture.

While cus­tomers may stop vis­it­ing bank branches for trans­ac­tion-re­lated ser­vices, when they need to han­dle com­pli­cated is­sues as­so­ci­ated with life-chang­ing events, such as mort­gage loans, they are likely to still pre­fer hu­man con­tact.

Hence, the pos­i­tive news for large banks is that cus­tomer be­hav­ior does not change overnight and not all cus­tomers are dig­i­tally com­pe­tent.

Fin­tech is do­ing away with jobs that are mind-numb­ing for hu­mans. Ev­ery tech­nol­ogy needs peo­ple to man­age it.” Jen­nifer Carver, chief in­for­ma­tion of­fi­cer at Nest.

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