Monday, November 25, 2013

Micro-payments, Major impact on banking, unemployment, education and the middle classes

British Bank Barclays will be removing 1700 jobs from their branch network. These include personal bankers, cashiers, operational specialists, assistants and branch managers. See The major reason is that mobile payment technologies are no longer requiring such personal interactions as consumers reduce their transaction costs of commuting to banks and waiting in queues.

The growth of the mobile payment industry has been talked about for quite some time. Although the impact on developed economies may be new, we know that mobile payments are making a major impact on transaction costs in developing countries where distances travelled for making remittances can be huge and unsafe.

The impact of this news is certainly known to bankers. However, educational institutes would do well to start preparing for a change in the nature of jobs that bank managers will be required to undertake. There is probably a greater need for accountants reconciling millions of tiny payments and less for operational managers. Evidently, software for bank reconciliations will find a growing use.

Creative destruction à la Schumpeter is certainly good news for those who believe in capitalism. Certainly, new kinds of jobs will be created in developing, maintaining, and perhaps even hacking competitor payment sites.  Jobs in website security are therefore another new area of developement. However, the changeover from one kind of technology to another may have a time lag as far as unemployment is concerned. The soon to be unemployed bankers would need training and education. But to do what?

In today's world, it is easy to keep a watch on jobs which are threatened. It is far more difficult to predict and prepare for new opportunities which will reflect tomorrow's needs.

Since the bankers who are laid off are likely to be from the middle classes, and since the unemployment may not be temporary, it is possible that these people will fall into poverty.

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