SINGAPORE – Weak revenue and negative interest rates are not the only reasons why European banks are cutting jobs. Technology is playing its part, too.
Over the past year, banks on the continent have announced more than 60,000 job cuts. On Monday, Dutch bank ING, the country’s biggest lender, announced a scaling back of its branch network in Belgium and the Netherlands, with the loss of 5,800 positions over five years, as it focuses on Internet and mobile banking and automates systems.
ING expects to save about €900 million (S$1.38 billion) in annual costs through the initiative, the lender said, adding that it will invest about €800 million in digital technology.
“Unfortunately, digital transformation means fewer jobs,” chief financial officer Patrick Flynn said in an interview on Bloomberg Television.
“Customers are increasingly digital and bank with us more and more through mobile devices. (They) expect us to adopt new technology as fast as companies in other sectors,” said ING chief executive Ralph Hamers.
ING’s announcement came after ABN Amro, the Netherlands’ third-largest bank, said last month it was shedding 1,375 jobs over the next three years as it moves towards greater digitalisation. The announcements herald the latest wave of job cuts at European banks, which have struggled to increase profitability since the global financial crisis and the region’s sovereign debt debacle.
With negative interest rates, volatile markets and tougher capital requirements eroding earnings, some of Europe’s largest lenders have been forced to deepen cost cuts. Last week, Germany’s Commerzbank disclosed plans to cut 9,600 jobs, while Spain’s Banco Popular Espanol said it will eliminate as many as 3,000 posts. Last October, Deutsche Bank also announced plans to eliminate 9,000 jobs as part of an overhaul.
A report by Citigroup earlier this year forecasts that retail banking automation could spur a 30 per cent decline in banking jobs across the United States and Europe over the next decade. That would be the equivalent of eliminating nearly 2 million jobs.
In Asia, including Singapore, the financial industry has also seen a raft of job cuts from global banks such as Bank of America, Goldman Sachs, Standard Chartered, Barclays as well as Australia and New Zealand Banking Group. They will not be the last to axe employees.
“Things that can be robotised, mechanised or digitised will be robotised, mechanised or digitised. Banks will, hence, continue to lower human touchpoints as they digitise operations and move to cashless payment modes,” Mr Patrick Tay, West Coast GRC Member of Parliament and alignment director for Professionals, Managers and Executives at the National Trades Union Congress, told TODAY.
“Through our various government-led initiatives, under the broader framework of skills future programme, our focus is on redesigning jobs and redeploying the otherwise extra workforce to areas that will need more people,” he added.
DBS Group chief executive Piyush Gupta last week warned that banks in Asia are on a burning platform, saying he expects the banking landscape in Asia to change dramatically over the next five years, with poorer returns and compressed margins becoming common occurrences unless lenders embraced fintech and transformed their businesses.
Speaking at an industry event, Mr Gupta acknowledged that the transformation process would not be easy and that many banks would face challenges shedding their legacy. But banks, he suggested, could tie up with fintech firms, harness their technology capabilities and marry that with strengths that banks possess, such as in clearing and settlement systems as well as consumer trust.
“The banking industry, like several others, is being profoundly impacted by new technologies and changing customer expectations. In such an environment, our future success depends on our ability to harness the digital revolution and completely re-imagine the banking experience,” a DBS spokesperson told TODAY yesterday.
“We have been focused on this, and have made good progress, including being named World’s Best Digital Bank. Continued investment in our people has also been a key priority. By future-proofing our people and inculcating a digital mindset in them, we believe that they will be able to innovate and lead change.
“For example, last year, more than 2,000 employees gained exposure to digital culture, agile methodology and other digital working concepts through human-centred design workshops and hackathons held throughout the region,” the DBS spokesperson said. Agencies, with additional reporting by Rumi Hardasmalani