Successful digital banks of tomorrow will be those that have built the right levels of digital skills within their ranks and automated those that carry less value.

New technologies and combination of technologies are facilitating businesses to serve their customers in ways they had never imagined before or even thought of as possible. An analysis published by Deloitte found that 25% to 31% of job positions in services will be automated in the next 20 years.

Similar to other industries, banking institutions are now facing the pressure to digitally transform themselves. The primary drivers continue to be the need to offer higher value to meet the demands of the changing customer, who expects a higher degree of digital enablement, ease of use, and rapid response to their queries.

Technologies such as blockchain and cryptocurrency are also enabling digitally agile services businesses to compete with banking institutions in selective areas. The open ledger use case, facilitated by blockchain technologies, promises to disrupt all types of manual and time-consuming processes of audited documentation.

In other areas, the legacy approach of banking institutions to build large scale branch offices to engage with existing and potential customers is fast approaching obsolescence. Many of the requirements of new and existing customers is merely access to the right information, at the right time and through the channels of their choice.

Start-up fintech companies

Repetitive, defined, and process-related work positions are expected to be eliminated as a result, while new and highly-skilled roles will be created simultaneously. McKinsey & Company states that investment banks that have successfully adopted automated trading and other measures can increase profit by 30 per cent.

New start-up fintech companies, built on next generation technologies, are able to present this information, that is of value to customers, in a more seamless and digitally enabled manner. Banking institutions that have existed for decades are now under pressure to accelerate their digitisation efforts or face the threat of losing out to fintech start-ups. Reality is that majority of banks that were built on technologies of yesterday can no longer deliver the value that today’s digital-age customers expect and that other fintech companies are providing.

New age customers are driving traditional banks to relook at their digital customer experience. Those banks that choose to go all-in, will end up with business models, organisational structures, and economics that are vastly different from the incumbent banking players of the past and present. Digital channels will become the default and the initial point of entry for customers.

On the other hand, the banking industry is an industry where the future impact of these forces is hard to predict. This sector has a number of inertial factors that make it slow to adapt, including regulation, legacy IT systems, and customer preference to use the same banking service. However, this has not prevented incumbent and entrenched banking players to start looking at their ranks and begin to embrace automated responses and longer-term gains in terms of cost reduction and predictable customer experience. Some experts point out that the bank tellers of today resemble the telephone operators of the sixties and seventies, now on their way out.

New digital technologies are fast replacing the back end and operational part of the workforce, making them redundant in the coming years. These job roles will need to be restructured to drive more value for customers thereby creating opportunities for as yet untapped revenue streams.

Other front-office and manual roles within banking will be aggressively assessed to evaluate their ability to be automated. Ability to integrate technologies such as machine learning, algorithms, chatbots and robo-advisers in the coming years will differentiate success or failure in the all-in digital transformation strategy of banks.

Human interaction

On the flip side, no amount of automation and technology is likely to replace the need for human interaction, especially in retail banking. The challenge for the banking industry of tomorrow, readjusting to multiple levels of consumer technology enablement, is to get the right balance of digital technologies and human engagement in their customer facing channels.

Reducing the ranks of the workforce in process driven areas, will also put more pressure on the newly created positions and readjusted workforce to deliver monetary returns of a different nature. This underlines the need to invest in training and skills enhancement.

New age digital banks will aggressively look for new skills and talent from outside the financial industry and more from the technology industry as they choose to build the ranks of data coders from within. This places enormous pressure on the human resources department to attract fresh talent and build the related skills internally, among its existing employees as they make progress in their digital transformation.

According to Accenture, 61 per cent of respondents driving digital change within their organisation have realised that shortage of digital skills is a top challenge, and are concerned with how to attract and retain the best digital talent.

By adopting disruptive technologies, where automation will replace many of the roles played by humans today, banking institutions will be able to increasingly operate as virtual businesses without boundaries and walls.

Mashreq’s branchless bank

As an example, Mashreq Bank is set to become a branchless bank, according to its CEO, Abdul Aziz Al Ghurair. In the future, 95 per cent of transactions will take place outside the branch, Al Ghurair points out. But such a bank without boundaries does not exist today.

Antony Jenkins, former Barclays CEO, says that pressure from the technology industry will compel banks to significantly automate their business, leading to a decline in staff and branches of as much as 50 per cent in the coming years. In India, HDFC Bank has decided to reduce the number of its branches countrywide by 50 per cent.

The challenge, therefore, is to get the right blend of human skills and digital tools to drive value for the customer. Chris Skinner, author of the best-selling book — Digital Bank, describes this very well when he says that banks must focus on humanising the digital relationship and not digitising the human relationship. The future of the banking business now rests on getting the right balance across people, technology, business, and the customer.

— Shukri Eid, Managing Director — East Region, Cisco Middle East