Fintech will disrupt much more than bank services

The focus on fintech disruption of banks has largely been about services: better customer experiences and challenges to the core infrastructure of banking. As a result of fintech disruption, bank services as we know them will change more in the coming years than they have for decades.

Won’t somebody please think of the employees?

While bank services are changing, there is an even greater disruption creeping up on banks: that of staff motivation and engagement.

Banking, like many other industries, has shifted from process work (tellers stamping cheques) to knowledge work (designing an app that does away with not only cheques, but manual processing altogether).

In the old world of manual process work banks employed traditional external motivators, typically in the form of financial rewards, to engage their staff. Knowledge work, however, requires a completely different set of motivators, termed ‘intrinsic’.

The video above explains this far better than I could. And 18 million plus views back that up.

The key takeaway is that external motivation destroys knowledge work.

Staff engagement is linked to motivation and a sense of purpose.

“Millennials want their work to have a purpose, they want to feel they contribute something to the world,” per PricewaterhouseCoopers’ 2016 Global CEO Survey.

Where do you want to work?

Fintech companies are genuinely putting the customer first. Just look at how Moven and TD are providing innovative solutions around customer financial health. They care about the financial health of their customers, as opposed to how much they can make.

Prospa, one of Australia’s fintech success stories, is another example. The company’s solving how to provide commercial loans to small and medium companies. It’s helping customers that banks just aren’t willing to service. In response to this competitive threat, one of Australia’s big 4 banks, Westpac, chose to white label Prospa’s services.

The companies with growing reputations for creating better services for people and making a genuine difference to their lives are the fintechs. Anyone seeking purpose (one of the key intrinsic motivators) in their work will clearly favour working for a fintech over a bank.

Fintech staff are the creators, bank staff are the integrators. Where would you like to work?

What, then, is the biggest challenge facing banks?

Simply: a brain drain.

Not only will banks lose their existing talent, they will find it harder and harder to recruit the next generation of staff.

Nor will this be an easy journey. Some fundamental shifts will need to happen, specifically around remuneration structures. Putting the financial health of customers on par with or above profits would likely be an integral step. Regardless of whether this would be adopted by the current cohorts of banking staff, managers, executives, etc., there is a serious question as to whether shareholders will ever allow this to happen.

This is an interesting question. There would undeniably be short term drops in profitability if a bank were to shift its focus from profit at all costs to building lasting financial partnerships with its customers first and foremost.

This all indicates we might be at a tipping point, where the long term viability of banks (and their large profits) are under threat due to fintech disruption. Staffing costs may also begin to rise to overcome the intrinsic motivation deficit (in both remuneration and churn).

No easy answer

CommBank, arguably Australia’s most customer-centric bank, recently changed its vision in its customer emails:

Our vision is to excel at securing and enhancing the financial wellbeing of people, businesses and communities.

It seems CommBank is ahead of the pack. Is this just a tag line or the vanguard?