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FinTech boom could lead to 1.7 million banking staff cuts, predicts Citigroup
In a recent report titled ‘Digital Disruption’, the US global investment bank Citigroup forecasts that the growth of the current FinTech boom will lead to European and US banks cutting 1.7 million jobs by 2025.
The 112-page report investigates the advances and investment in the current FinTech market and calculates that these cuts will amount to approximately a third of the staff that banks currently employ across the US and Europe and are in addition to the 730,000 jobs which banks have already cut for similar reasons.
Investment trends in the FinTech sector are putting banks under pressure to evolve, as customers, who have become accustomed to using mobile apps and online banking for their every-day banking needs, are increasingly willing to turn to alternative forms of technology-enabled financial services.
Mass investment into the FinTech lending market means that banks are having to make large cut backs and find new ways to maximise profitability. To illustrate this, of the banks analysed in the report Citi suggests that 56% of profits typically come in the lending sector, which is also the sector which attracted the majority of the US$19bn of Fintech investment in 2015.
The report describes China’s transition from physical to digital financial flow as “breath-taking” with 96% of e-commerce sales having been processed without a bank’s involvement. Furthermore, the Eurozone’s largest bank, Santander, recently announced plans to close 450 of 3,467 Spanish branches in order to spur profitability and address the shift to digital banking – these cuts alone could lead to 1,000 workers losing their jobs.
The beginning of the end for banking as we know it?
Putting the FinTech boom into perspective, it is still estimated that new business models have only displaced 2-3% of consumer banking revenues in the US. As Citi GPS managing editor Kathleen Boyle explains, “incumbent financial institutions still have the upper hand in terms of the scale and we have not yet reached the tipping point of digital disruption in either the US or Europe”. Nevertheless, given the demands from customers and the current focus of FinTech investment, it may not be long before we see an upheaval of the current banking world as we know it.
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