The brave new banking world

‘Banks want to play tech companies,’ read a headline in this newspaper earlier this month. Given a private sector chronically starved off both credit and employment opportunities, the latest slogan from banking community is long-awaited and well-received. Afterall, the digital revolution is hoped to be the much-needed blood infusion to revive an economy on ventilator.

The market is ready. Higher education institutions are churning out graduates even as traditional tertiary sector job market has stagnated. Average real wage of fresh graduates may in fact have been on a decline over past decade by some estimates. Cognizant of the fact, universities have begun retooling their business programs into a more digital-entrepreneur friendly shape. Additional impetus has been received from the brave new world of crypto currency. The final piece of the puzzle has also neatly fitted in with a nod received from central bank in the form of investor friendly EMIs regulations.

In this context, commercial banks are ready to exploit an opportunity waiting to be snapped. Yet the threats lay inwards. It is not the first time that the industry has come face to face with a growth-friendly regulator and a market bursting at it seams with skilled workforce pool. While the sponsors and top management may be truly on board, the opportunity presented by the digital revolution can only be exploited if the bureaucratic middle-management does not play the role of saboteurs.

Traditional local bankers are by design a risk-averse bunch. Trained to play personal bankers to a restrictive asset-base of seths and local businesses ‘with credible name-checks’, their skillsets and job descriptions are both out of sync with the new world order where target audience consists of ‘unserved’ and ‘underserved’ populations.

Consider that the incentives of star bankers – whether from risk management or business shop – are stacked such that performance is usually measured in piles of legal documentation processed with perfection. New-to-bank origination has long taken a back seat as relationship management with favoured and well-connected seths is the preferred yardstick for annual appraisals.

In this environment, it is no surprise that even fresh bankers become comfortable in cushy jobs with set career-paths, content in enhancing working capital and trade business lines of existing clientele. Even the so-called greenfield financing by investment banking shops remains a mirage. This should be of little as project finance loans – whether extended in the name of ‘renewable energy’ or ‘new investment’ - remain confined to the ten-odd celebrity business groups of the country.

Unleashing the potential of ‘unbanked’ can no longer simply be a buzz word in the ‘good-deed lists’ at banks’ CSR departments. Even if the brick and mortar shops go out of fashion, the tech revolution at commercial banks may still fail to bear fruition. The change must be embraced by the middle management which is still resistant to see beyond the ways of conventional lending and deposit collection, and scoffs at the idea of ‘Pakistan’s untapped rural banking potential’ as mere marketing gimmick.

In a world where nerds dressed in slacks and sneakers have come to lead the way, commercial bankers in their three-piece suits may very well be on their way to becoming dinosaurs. Although readers may feel that talk of change management and ‘adapt or die’ from news industry may sound rich, suffice to say that organizational changes are easier when the sponsors are sold on the idea. At least commercial banks have that challenge figured.