Pub. 8 2018 Issue 2

21 ISSUE 2. 20187 in banking is far from new. 20 For example, ATMs allowed banks to reorient tellers to sales and advisory roles from purely transactional activities. 21 The future workforce is expected to also be more diverse than it is today. In addition to permanent employees and contractors, it will likely in- clude freelancers who work with multiple banks, fintech hackathoners to generate novel solutions, and even robots that work alongside humans. 22 While it is tempting to think that technical talent might be all that a bank really needs to succeed in a technology-driven world, it would be short-sighted to ignore the value of enduring human skills. Banks should continue to align the organization more deliberately with the values of employees as part of corporate social responsibility and envi- ronmental, social, and governance (ESG) efforts. How prepared are institutions for this transformation? So far, only 17 percent of global executives across all industries, let alone banking, responding to the Deloitte Human Capital Trends survey say they are ready to manage this diverse workforce of people. 23 Bankers would need upskilling to work more effectively in a digital environment, according to the MIT Sloan Management Review and Deloitte Digital’s global study (see figure 4). 24 One global example is Singapore’s DBS Bank, investing SG$20 million to train its existing workforce in digital banking and emerging technologies, via an AI-pow- ered e-learning platform, curated curriculum, and module delivery. 25 As part of this transformation, banks will likely need to reorient exist - ing workforces to be collaborative and inclusive, while providing them with more integrated employee experiences—from recruitment to re - tirement—to mirror the richer customer experience that the workforce is enabling. This workforce experience would have to be designed to accommodate a work-life balance, a purpose-driven career, and of course it should be digitally enabled. Playing short to aim long We’ve discussed six broad macro themes that banks should consider baking into both their strategies and thinking around long-term, sus- tainable growth. We consider this exercise the long game, and realize that the industry is in the initial stages. Accordingly, a way to address how the themes of this long game play out in the next Figure 4: The need and the will to reskill banking talent 12-to-18 months might be to examine how they are being addressed along five broad business lines. At a high level, retail and commercial banking should continue to grow at a healthy pace, but the challenge might be to adapt to a mobile centric, customer-oriented world in which automation is increasing. Payments and capital markets businesses will likely witness the most change, with the former seeing unprecedented disruption, and the latter undergoing a shift in the basis of competitive differentiation. Wealth management, on the other hand, would need to evolve with the ongoing democratization of financial advice. Retail banking: Transitioning to a mobile centric and digitally anchored institution Banks should capitalize on the shift to a mobile centric world by reorienting targeting strategies, product portfolios, and delivery models. The United States is in the midst of the first interest rate increase cycle in over a decade. Signs of monetary tightening are also visible in the United Kingdom and Europe as economic growth strengthens. Banks that successfully target customers through sophisticated data analytics, make compelling product offers, and deliver strong digital experienc - es, could gain funding advantages and see slower increases in deposit costs. This targeting can be important, as post-crisis liquidity rules, particularly the liquidity coverage ratio, could fuel price wars for sticky retail deposits. Deposit pricing pressures, as now seen in wealthier customers’ ac - counts, could restrict the growth in net interest margins (NIMs), 26 a headwind that would prove challenging even if the yield curve in the United States steepens later in the rising interest-rate cycle. However, strong retail deposit bases—linked to solid digital offerings and the ability to acquire new deposits—will likely drive better ability to sustain margins. The resulting flexibility in credit selection and pricing should support better asset quality and capital positions through the credit cycle. This context is important to frame the growing dominance of the mobile channel. It is fast replacing the branch as the focal point of the banking experience, achieving engagement even beyond that of online banking (see figure 5). 27 Mobile is also rising to the fore in critical processes in the customer lifecycle, and within key demographics— millennials and mobile banking consumers are most likely to demand improvement in the account opening experience, according to a recent Deloitte study. 28 Yet viewing mobile as just another channel is myopic. Mobile tech - nology is not only a tool to enhance customer experience but it can also raise productivity in other channels (see figure 5). For instance, Umpqua Bank is piloting software that allows in-branch representatives to also serve as personal bankers on digital channels. 29 2018 Banking Industry Outlook w Continued on page 22