Panic as banks embark on historic cost-cutting operations

“The days of brick-and-mortar banking are well over, and every board is thinking of a realistic route out of the old structure and move into the era of smart businesses…”

THE long bandied smart business remodeling templates of money deposit banks (MDBs) are beginning to take definite shape.

At the weekend, Naija Times was informed that the envisaged business models expected to substantially reduce the bloated costs of operations are sending quivers through the banking halls as bankers look forward to their future careers with skepticism.

There are no formal communication engagements on how the planned restructuring, which sources said is nothing different from “handing over much of banking operations to new technologies,” will affect jobs. 

Yet, there are clear indications that future banks will lean on human intervention. This, a top banker, said would drastically reduce the overall “manpower need”.

While the banks will run lean routine operational staff, the new banking model, which has started in earnest but is now being aggressively improved upon through capacity building and partnerships, will bring into the system more technical experts as the system.

Findings suggest that the board of a tier-one player has mandated the management team to commence the process of reducing its personnel cost by, at least 20 per cent before the end of the financial circle. The tough mandate, a source said, has triggered unease, especially among the senior staff “who corner much of the personnel costs”.

“If you are looking at cutting costs by as much as one-fifth in a year, the low-hanging fruits are those who take home millions monthly. All cadres of the personnel could be affected. But system transition is gradual. 

“Besides, we are in a society that is extremely conservative and slow in adapting. This means the majority of junior employees who interface with the depositors will not be needed. Where else will the management visit if not the senior colleagues who contribute little but earn much salaries and allowances?” a source, privy to the intrigue, queried.

If the cost reduction plans materialise, which insider sources said is a necessity, some banking outlets considered unviable would be closed. After last year’s Covid-19 lockdown, some MDBs closed operations in some of their branches considered as cost-centres. 

Close to a year after that decision was taken, many of them are yet to commence full operations and are likely not going to be full-fledged operational centres anymore, Naija Times has been informed.

It would be recalled that Herbert Wigwe, chief executive officer of Access Bank, said in a video that had gone viral last year as businesses reopened, that he was willing to take a 40 per cent pay cut as part of efforts to cut operating costs. Wigwe stressed that “everybody may have to make some adjustments of some sort” to keep the bank afloat. 

Wigwe’s position was a general but muted view in the boardrooms of the financial institutions. The banks are now dealing with a harsher reality of cost reduction as competition and a tougher operating environment have pushed them to dire situations.

“We need to find a way to get out of the challenge, which does not show any sign of abating. The days of brick-and-mortar banking are well over, and every board is thinking of a realistic route out of the old structure and move into the era of smart businesses,” a top banker said.

Indeed, banks face tough competition, not from within but from without. Flurries of peer-to-peer apps that enable depositors to transfer money at zero cost are being created monthly. The banks are being forced to come down from the tall horse.

Banks are already moving their operations online. For instance, with Wema Bank PLC’ ALAT, one can open and operate a bank account without any human intervention. The bank said it is competing with tier-one players with the technology, which is being deployed to address the banking needs of rural dwellers.