Jenkins says that these smaller technology-driven companies come up with ways of completing the same task in a faster, better and cheaper way, duplicating which will be a challenge for bigger players.
Former Barclays CEO Anthony Jenkins has said that the banking sector is likely to see small yet disruptive finance technology start-ups soon, which will shake up the segment, according to a report in Business Insider. According to Jenkins, who was heading the bank until earlier this year before stepping away without any clear reasons, this growth in finance technology will lead to nearly 50% job cuts and bringing the profitability of even big banks down by nearly 60%.
Jenkins says that these smaller technology-driven companies come up with ways of completing the same task in a faster, better and cheaper way. He has added that "In my view only a few (incumbent banks) will have the courage and decisiveness to win in this new field."
The US already has companies that enable peer-to-peer lending, operating as network orchestrators that help connect a lender to a borrower. These companies are essentially eliminating the need for a bank, even getting the lowest or most-viable interest rates for the borrower. There are certain companies in India offering the same service too, however, it is too early for a market like India to buy the model.
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According to a survey by software company Temenos, cited in the report, nearly 27% senior bankers have said that technology companies are the biggest threat to their business. Jenkins says that the process is already underway, with companies like TransferWise, Square, Nutmeg, Funding Circle, disrupting the segment.
Jenkins says that one of the main challenges for banks will be duplicating the new technologies and applying them to their businesses at the same pace as the new Ubers for banking. They too will be compelled to automate their businesses to a large extent, thereby bringing down the number of jobs held and branches significantly. He pegs the number at a 50% drop in the number of people employed in the banking and financial services sector in the next ten years. On the lower side, he sees a drop of nearly 20% jobs in the segment.
He also says that technology-driven companies in the banking sector will likely bring down profitability by two-thirds from financial products like retail lending, credit cards and car loans.
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