Banking and Digital Finance: HR Predictions for 2021

As most financial institutions would be embarking on their digital transformation in 2021, there would be a dramatic shift in their organization structure. Digital ambitions of the banks are already visible across the spectrum from NBFCs to Small Finance Banks to PSU banks to large private sector banks, who are mapping their customer journeys with Fintechs and Neobanks.

Hiring & Downsizing will go in tandem:

Hiring would increase across areas like product, technology, digital marketing, compliance, user experience, data science, partnerships etc. There would be rightsizing (10 to 50%) in the areas of operations, credit, sales, finance etc, whose work may be partially or fully automated. Many of these impacted employees will move towards newer roles through accelerated training programs.

1.   Impact on Technology: We see a positive impact on jobs and opportunities for the tech staff working on transformation. There would be an increase up to 30 percent with the management expectation moving from just "third party management or program management" to "insourcing and building cutting edge technology stack". This would pave way for a transitioning phase for the internal teams, which will need support from HR teams.

2.   Impact on Sales: We see an adverse impact on jobs and opportunities for sales staff focused on Retail and SME segments across the Assets and Liabilities business. There would be a definite reduction between 10 to 30 percent linked to the movement of customers towards digital, improvement in processes, and closure of branches.

3.   Impact on Operations: With the change in customer expectations and overall automation across customer journeys, we believe that over the next 24 months nearly 30 to 50% of the front office, as well as back-office roles, will get reduced. Anyone in these roles should take a long term view and plan their own career path.

4.   Impact on Credit: Automation in underwriting has been one of the primary themes for digital lending over the last few years. In this year, we can see a 15 to 20% reduction in these jobs as larger institutions will adopt newer methods of underwriting.

Multiple roles across Corporate, Treasury, Trade will remain unaffected by market changes as Digital Transformation for them is still in the inception stage.

Creation of Newer Units

Current organization structure may not support the transformation expectations and hence, we would see the creation of newer units like:

1.   Banking As a Service: This unit would handle all Neobanks, Fintechs and embedded finance partners and would have its own P&L. This unit may be named API Banking Unit, Open Banking Unit based on individual nomenclature.

2.   Digital Banking: This team would handle the full-scale Digital Business (including sales) of the bank instead of just focusing on services as is the current approach.

3.   Data Science: We are seeing an intense movement towards building an in-house Data Science Unit to support overall business across all channels.

Leadership and Board level changes:

In the next 12 to 24 months, almost 30% of the top management would be with deep digital/customer engagement/technology experience. This would create internal challenges as many of these would be lateral hires and maybe from different age brackets and limited finance experience.

Forward-looking institutions would not just hire for these roles, but actively support the amalgamation of these members in decision making and transformation journey.

We also believe that the role of the leadership would change to “Intrapreneur” due to the environment of extreme innovation, regulatory interventions, volatility, uncertainty, complexity, and ambiguity.

Almost all Financial institutions would have at least 1 Digital Leader on their board, which would be a vast improvement on the current status where just 20% of these entities have this experience on their boards. We also believe that the may even come as a regulatory mandate.

Change in KPIs

As most roles go through the transition, the KPIs of current, as well as new roles, would also need to go through changes. We have seen that multiple organizations have made the mistake of not aligning performance measures with newer expectations, thereby pushing the employees towards sabotaging the digital agenda.

In one example, we have seen new digital customer onboarding and servicing platform was not supported by the branch staff as they were taking this initiative as a threat to their roles with no positive impact on their KPIs.

Change in Compensation Structure

Digital skills are in short supply and will need to be compensated outside the current baselined salary and incentive structure. Without this basic change, the organization with all right intentions may not even be able to start their digital journey. This needs clear mapping of skills with market expectations.

Training and Culture Change

Skills required for running Digital Initiatives are different from skills available within large organizations. To ensure that teams are getting for the future, training of resources around Fintech / Digital Lending / Digital Transformation / Open Banking / Innovation / Change Management would be the HR theme over the next few years. These interventions may be done through internal champions as well as through external experts.

We believe that Year 2021 would be the toughest year for HR Leadership as they face the biggest challenge of their life, similar in cricketing terms to "Transforming a Test Player into a Twenty20 Allrounder in just 12 months"