IT Powers a Financial Services Revolution
Mohit Joshi talks about the scope for digital transformation in the financial services industry
There's perception and then there's reality. Walk into any bank and you'll notice that there are probably no less than six teller windows. But even in the busiest of cities in the middle of a weekday, there are at most two or three windows manned by a teller. The perception is that the bank is ready to serve customers at a moment's notice. The reality is that there are never more than a couple of tellers on duty.
The automated teller made it so that customers wanting to deposit or withdraw cash - functions that account for 80 to 90 percent of a teller's duties - could swipe their ATM card and be done with the transaction in a minute or two. No waiting in lines at the bank. Yet for the better part of 35 years, banks continued to design their branches with spots for multiple tellers. It's not that someone forgot to tell the architect; banks intentionally wanted to appear to have a sizeable, physical customer service force by having all those teller windows.
My hunch is that in the next few years you will finally start to see new branches open with far fewer windows. That's because the perceptions of the financial services consumer base have caught up with reality. Savvy customers have no intention of waiting in lines anymore because of a more recent innovation - one that rivals the ATM. I speak, of course, of mobile digital banking. What the ATM did for the teller, mobile banking is doing for the entire financial services industry. I met a Bank CIO recently who told me that he has more customers log into their mobile banking app in a day as enter any of their branches in a year !
I just read a news report about how one of the world's largest banks is laying off tens of thousands of employees. The bank continues to be profitable. It's not slashing its workforce in order to stay afloat. Quite the opposite. Its leadership rightfully acknowledges that digital banking has made many front and back office functions redundant and unnecessary. Why pay for a teller to stand at a window when the value of that position rests in Information Technology that powers a digital banking system? This is also why despite the drops that Banks have seen in their revenues, no one has dropped their IT spending. It would be suicidal in this market.
The best part of the digital banking revolution is financial inclusion. People around the world, many of them residing in the emerging and frontier markets, are now able to access banking services from their smart phones. No bank branch is even necessary. Digital services help people in all regions of the world do things like start businesses and grow personal savings. That means millions of people are being lifted out of poverty. It hard to be middle class or even aspire to reach there without formally entering the financial system.
Indeed, whereas the traditional bank teller might be a thing of the past, as well as all those teller windows, the digital banking revolution is stimulating the global economy in ways that will make all enterprises more productive.