At a panel discussion during a meeting of the Institute of International Finance in Tokyo last week, the conclusion was clear: financial institutions must utilize technological innovations if they hope to survive.
Reflecting upon an increasingly competitive landscape, a number of top finance executives noted that pressure from technological advances and innovations by non-bank fintech companies have created pressure on traditional financial institutions looking to meet customer demands for faster service and lower costs.
Standard Chartered group chairman Jose Vinals notes that “we live in a world where customers want convenience, want low cost, want fast service, want solutions…we are in the world war for the client.” Vinals went on to predict that not all banks will emerge on the other side: “And remember: If you think of the future of mankind, it is not the survival of the strongest, it is the survival of the fittest.”
While the executives on the panel all agreed that embracing technology was necessary for financial institutions looking to move forward, they generally agreed that doing so was not without cost. Nobuyuki Hirano, chairman on Mitsubishi UFJ Financial Group, noted that his firm faced a strong negative reaction when it announced a five-year plan that improved efficiency through technology—leading to a reduction in about 10,000 jobs, or a quarter of the firm’s Japanese employees. Hirano noted that the plans “gave a kind of shock to our society…but that is the reality ... against the backdrop of a very tough market environment.”
Senior vice president and chief risk officer at China’s Ping An Insurance So Lan Ip agreed with Hirano. She pointed to her company’s real-life experience with adopting artificial technology to lower costs and provide additional benefits to the consumer. Just two years prior, Ping An employed 30,000 personnel in their call center. The increasing use of AI has cut that number in half with an end goal of reducing the number of call center employees to around “two thousand” within a couple of years.
Ultimately, the message delivered by the panel was clear: any financial institution that ignores technology does so at its own risk. As Hirano noted: “digitization is not optional.”