August 2nd, 2011
10:32 AM GMT
Cutting 30,000 jobs despite recording almost $12 billion in profit may sound irresponsible – but it’s not.
Banks are basically huge computers with relationship managers interfacing with customers. While most investment in retail banks has drawn to a halt, technology departments have actually grown, with the level of automation increasing.
The very definition of a bank is being stretched beyond recognition.
Why is this happening? Because it’s cheap.
In the 1990s, a basic core banking system necessary to manage accounts would cost you about $100 million. Today the same functionality comes off the shelf at about $1million.
At that price grocery chains, car dealers and electronic stores can easily start a bank in support of their own products.
And that is what’s killing retail banking.
As a result, banks have invested heavily in automating the banking experience and automation does not require an endless supply of people.
Banks are moving in the right direction; more automation to deal with the boring transaction and more emphasis on the area that matters most - client interactions.
This is why banks are downsizing and it is a positive step forward.
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