The first quarter of 2019 was breathtaking for Wall street’s major banks. Bank of America, Citigroup, Wells Fargo, and Goldman Sachs reported collective earnings of a record $100 million. This is a significant rise compared to the fourth quarter of 2018. For Economics students trying to answer why banks are cutting down their branches and staff despite the profit rise, this site can offer economics homework help reliably and professionally.
This year, Barclay’s laid off 1,700 of its employees. A worse report confirmed that Deutsche Bank is planning to cut off more than 7,000 jobs from its branches. Let us explore the possible reasons for this trend.
Embracing Virtual Banking
With better technology and automation, tellers will continue to lose their jobs.
A study by Annapolis revealed that 80% of Americans prefer to self-service their transactions on their tablet, mobile, or computer than through a bank teller.
Financial institutions like investment companies and insurance companies are digging into the market of big banks. This trend is due to the simplicity and flexibility of their products. Private investment companies allow better rates, hence attract more prospective customers. Most insurance products are custom made according to the client’s requirements as opposed to banking products which are mostly standard. A customer would ordinarily choose to have a product that is a perfect fit for his pocket and requirements.
With this loss of customers, banks have no option but to downsize.
A younger, tech-savvy generation is gradually replacing the previous generation which was over-reliant on physical banks. This new generation believes in the efficiency of computer technology, and big technology companies are taking full advantage of this. Companies like WeChat and Alipay offer non-bank options for making payments. The younger generation would prefer these options because they are automated and therefore, instant.
New businesses that individuals from the new generation create are most likely to allow virtual payment options like PayPal instead of cumbersome bank transactions, hence prompting their customers to also use these payment options.
The introduction of Cryptocurrency
When blockchain technology and cryptocurrency was first introduced, people did not understand or trust it. Nowadays there are millions of traders all over the world who trade in cryptocurrencies like Ether and Bitcoin. Before, these traders would automatically trade using normal currency through banks, which also explains the loss of customers by banks. This forces senior bank officials to consider the number of employees and branches that they have.
Even with competition from other financial providers, banks will remain to be the leading financial institution for individuals and businesses. Various factors like reliability and financial strength ensure that this is so.
Going forward, banks should consider integrating all forms of new technology to their service provision system. The internet and mobile phone technology that appears to be their biggest challenge should be incorporated and turned to an advantage to the banking system.
Business and economics majors that hope to work in big banks should consider supplementing their courses with Information Technology studies. Business colleges should also revise their courses to include studies in the various changed elements in the banking industry.