Chapter 10
Contemporary Issues in
Money and Banking
BY: JOEL THAM K.M.
Human Capital Management in
Banking (Role and Importance)
Human Resource Management is important for banks because banking
is a service industry. Management of people and management of risk
are two key challenges facing banks.
How you manage the people and how you manage the risks determines
your success in the banking business. Efficient risk management may
not be possible without efficient and skilled manpower.
Banking has been and will always be a "People Business". Though
pricing is important, there may be other valid reasons why people
select and stay with a particular bank.
Human Capital Management in
Banking(Role and Importance)
Banks must try to distinguish themselves by creating their own niches
or images, especially in transparent situations with a high level of
competitiveness. In coming times, the very survival of the banks would
depend on customer satisfaction. Those who do not meet the customer
expectations will find survival difficult.
Banks must articulate and emphasize the core values to attract and
retain certain customer segments. Values such as "sound", "reliable",
"innovative", "international", "close", "socially responsible’. need to be
emphasized through concrete actions on the ground and it would be the
bank’s human resource that would deliver this.
Human Capital Management in
Banking (Functions)
Human Resources Planning
Acquiring the right people
Retaining/ Developing the people
Managing people separation / exit
Human Capital Management in
Banking (Challenges)
FINTech – Disruptive Technology
Fintech – or financial technology – was a buzzword in 2015 with start-
ups raising large sums of money and talking up the "disruption" they
could cause the established players from banks to payment firms.
Last year, financing for fintech start-ups hit over $20 billion, a 66
percent increase on the $12 billion recorded in 2014, according to
KPMG.
And new technologies could see up to 30 percent of jobs eliminated
from the banking industry, Citigroup said in a study published last
week, highlighting the threat to traditional companies.
FINTech – The Players
Adyen
Adyen is an international payments processing company that counts
Uber, Spotify and Facebook among its clients.
The Dutch firm was founded in 2006 and offers payment services on
desktop, mobile and in-store.
FINTech – The Players
TransferWise
TransferWise is a peer-to-peer money transfer service described by the
FinTech 50 panel as one of the "original fintech revolutionaries".
The London-based firm allows users to transfer money across different
borders and currencies at lower costs than traditional banks.
Last year, TransferWise raised $58 million led by U.S. venture capital
firm Andreessen Horowitz in a round that valued the start-up at $1
billion.
FINTech – The Players
Nutmeg
Nutmeg was chosen on the list "for taking investments online".
The British start-up is an online wealth manager which is regulated by
the U.K.'s Financial Conduct Authority (FCA).
Nutmeg recently cut its prices as a number of competitors entered the
market and said it would soon introduce an automated investment
advice service or "robo-advisor."
FINTech – The Players
Currency Cloud
Currency Cloud is another start-up in the payments space.
The British firm provides cross-border money transfers for businesses. It
sets itself up as a rival to banks that usually carry out this transaction,
but says it is cheaper and faster than traditional players.
Founded in 2012, Currency Cloud now processes $15 billion a year and
has over 125 customers.
The start-up raised $18 million last year from Sapphire Ventures and
Japanese e-commerce giant Rakuten.
FINTech – The Players
eToro
There's been a whole host of new investment platforms popping up to
challenge traditional brokers and eToro is one of those – but with a
twist.
The start-up bills itself as a "social trading network", allowing users to
copy trading strategies of other traders which they deem successful.
Investors can trade currencies, commodities, indices and contract for
difference (CFD) stocks online.
FINTech – The Players
Funding Circle
Funding Circle is one of many peer-to-peer lenders that have popped up
in recent years.
The company matches investors to small and medium-sized businesses
and, as of December, had lent £1 billion ($1.4 billion) to firms in the
U.K.
FINTech – Importance of Innovation
The proportion of banks with an innovation strategy (defined as having clear
objectives, processes and measures of success for innovation) has increased from
37% in 2009 to 73% in 2015. When viewing the commitment to innovation from
year to year, the proportion of banks increasing their innovation investment over
the previous year was 15% in 2009, increasing to 84% in 2015.
That shift is significant, but of more importance is where that increased innovation
may be directed, and whether it will produce results. The industry thinking seems
to be that banks have to fear other banks — not FinTech startups.
They therefore target their innovation strategy funding more towards their
traditional products, rather than disruptive innovations. Like many other
organisations, banks also fail to generate meaningful innovation as they don’t
focus effort and energy on creating a culture of innovation within their firms.
FINTech – Importance of Innovation
The current size of the FinTech sector indicates that banks still own the market
and have a period of breathing room to adjust and respond. FinTech is disruptive,
but has not quite disrupted the industry just yet. That said, to respond by
increasing strategic innovation focus, but directing it at other banks rather than
at FinTech ignores the rapid rate of growth in the sector and the increasingly
imminent point at which FinTech, not other banks, becomes the most significant
market competitor.
Banks are all similar in their approach to market, so innovation in this space is
relatively simple because it is a competitive landscape that is understood.
FinTech players are, however, more segmented and have a different value and
supply chain. Banking innovation is now being engaged with different rules and
on a different competitive landscape - to invest in innovation assuming the rules
are still the same will lead to bruising defeats and consequences.
THE END
