Adapt or die: Banks' lesson from Citi-group's job loss report

A contributed opinion piece from Gary Turner, UK co-founder and MD at Xero

This is a contributed piece by Gary Turner, UK co-founder and MD at Xero


Earlier this year, Citi-group released a new report [PDF] that forecasts a potential 30% decline in European and US banking jobs - the equivalent over 1.7 million roles - as fintech companies command the control of the business finance market.

The report looked at where fintech companies are deploying their resources and the inevitable consequences for the traditional banking industry. For those working with small businesses, these results are already common knowledge - over the last few years small and disruptive startups have begun turning the finance industry on its head, described as the ‘root and branch reconfiguration’ of the ageing banking and financial services industries.

Citi-group’s report stated that while the banks are at a ‘tipping point’ with technology, just 1% of consumer banking revenues were generated from digital channels last year. In contrast, the use of mobile in business is rising at an extraordinary rate showcasing the power of the mobile and further proving that banks are finding it difficult to keep up with the changing landscape. In fact, Ben McLannahan, the CEO of online loans group SoFi said in an interview with the Financial Times that banks are “the dinosaurs and I am the meteor… they have a business practice which should be extinct.”

Innovative technology in the form of platforms, apps and services are reshaping financial services through a sharing economy model, sidestepping many of the architectural limitations that have suppressed fresh thinking, putting pressure on traditional business models and bringing huge changes to the structure of the finance industry. And without the right strategy, being left behind in the ultra-competitive finance market can be deadly.


The big business of lending and payments

Small to medium businesses now have access to the sort of finance that was once impossible to secure. As innovative challengers to banks are enabling SMEs to raise money without punishing fees, financial institutions are striving to keep up with innovative competitors. According to peer-to-peer lending company MarketInvoice - one of Xero’s ecosystem partners - information from the British Bankers Association (BBA) shows new loans to London SMEs fell 40% in Q3 of 2015.  The report goes on to explain that London SMEs borrowed £350 ($500) million through peer-to-peer lending in 2015 showing consistent growth.

With such technology platforms becoming increasingly easy and inexpensive to set up and the small business owners embracing co-creation and sharing, the finance industry is under serious threat, leaving no choice but to respond to societal change and embrace this new world of fast innovation, collaboration, sharing and citizenship.  

Other tech-savvy banks and non-bank companies such as PayPal, GoCardless, Stripe, Square, Moula and Kabbage are all examples of nimble companies who are eating into traditional payment industries - and with it, profits. For archaic banking corporations, job losses are a very real threat.


Corporate creativity

While a more flexible and digital financial world is beneficial for small businesses, the prospect of 1.7m job losses is concerning. As Citi-group’s report stated, big banks are at the tipping point with technology but they must move fast if they are to keep up. By increasing investment in tech departments and by partnering with the companies who are driving flexible innovation, they can keep up with the changing landscape.

Partnership is key here, and by building relationships between powerful corporations and innovative companies, there’s the capability for development and change for all parties. And with the right investment, it can bring about job creation rather than job loss.

As is the case in many fields faced with profound change, it’s neither the biggest nor most intelligent that survive, but those best able to adapt to their changing environment.