The world’s biggest banks reportedly slashed more than 60,000 jobs in 2023.
It was a year in which investment banks suffered their second year in a row of declining fees amid a downturn in dealmaking and companies going public, the Financial Times (FT) reported Monday (Dec. 25).
“There is no stability, no investment, no growth in most banks — and there are likely to be more job cuts,” Lee Thacker, owner of financial services headhunting company Silvermine Partners, told the FT, adding, “There are some very nice gifts being sent to bosses at the moment.”
According to the FT’s calculations, 20 of the world’s largest lenders cut at least 61,905 jobs this year. It was one of the worst years for job cuts at banks since the 2007-2008 financial crisis, when banks eliminated 140,000 positions.
Aside from UBS, the second largest number of job cuts happened at Wells Fargo, which reduced its headcount by 12,000.
The bank will also likely see greater-than-expected expenses from severances tied to those job cuts, with the price tag for those layoffs expected to reach $750 million to just shy of $1 billion for the banking giant’s fourth quarter, CEO Charlie Scharf said earlier this month.
“We are continuing to focus on efficiency with turnover dropping, unfortunately, we’re going to have to be more aggressive about our own internal actions,” Scharf said.
In total, the big Wall Street banks cut at least 30,000 jobs this year: 5,000 at Citi, 4,800 at Morgan Stanley, 4,000 at Bank of America, 3,200 at Goldman Sachs 3,200 and 1,000 at JPMorgan Chase.
“The revenues aren’t there, so this is partly a response to overexpansion. But there is also a simpler explanation: political cost-cutting,” Thacker said. “If you run a division and your boss asks for savings, you cut or you get fired.”
It’s not just banks cutting jobs amid a tougher economic climate. This year saw more than 250,000 tech workers lose their jobs, as both massive companies like Google and tiny startups cut their workforces.
Emerging Market FinTechs Poised to Drive Innovation and Inclusion in 2024
In 2023, the FinTech landscape experienced a transformative surge of innovations, reshaping financial technology from its core. These advancements, spanning cutting-edge technologies and the evolution of business models, have ignited a pivotal shift that goes beyond mere functionality, altering how financial services are accessed and utilized.
In a recent interview with PYMNTS, Jori Pearsall, chief business officer at Tala, discussed this wave of innovation, particularly highlighting its resonance in emerging markets like Southeast Asia. He pointed to the recent milestone of digital payments surpassing 50% of transactions in the region, signaling a departure from cash dominance.
This shift, he said, presents a promising opportunity for FinTech firms, which can leverage the burgeoning mobile adoption trend to unlock access to a vast audience in the upcoming year.
Pearsall also highlighted the digital lending gap in Mexico — it stands at a mere 18% against an 80% mobile penetration rate — as another significant growth potential for FinTech companies to leapfrog into mobile-based financial services, a trend mirrored across Latin American countries.
India, another market brimming with potential, has made remarkable strides in digital infrastructure, Pearsall said, citing initiatives like the Unified Payments Interface (UPI) as a driving force behind the ubiquity of digital transactions in the country.
However, despite high bank account penetration, nearly 80% of India’s population remains financially underserved, presenting a compelling landscape for FinTech players to bridge the gap. “When you have this kind of melting pot of strong technical solutions and a large, underserved audience, you’ll see a lot of tech-savvy players trying to dive in in the year to come to close that gap,” Pearsall said.
Acknowledging the challenging macro environment going into 2024, Pearsall emphasized a shift toward more partnerships between FinTech startups and established incumbents, with both sides leveraging their strengths for mutual benefit.
For FinTech firms increasingly focusing on belt-tightening amid mounting pressure from investors to pivot from growth to profitability, Pearson’s view is that collaborations with incumbents will become increasingly critical, not just in sustaining business models but also in enhancing customer value propositions.
“We have FinTechs that are more nimble, flexible and can bring solutions to market more quickly, but at the same time, gone are the days of abundant cheap venture capital dollars,” Pearsall said.
On the other hand, a tighter macro climate generally translates to more constrained budgets for incumbents’ in-house teams, which in turn puts internal research and development (R&D) on the back burner. In this scenario, partnerships with FinTechs will become the avenue to foster innovation, he said, adding that this mutual recognition will drive both established incumbents and burgeoning FinTechs toward a shared pursuit of collaborative initiatives.
Despite having built a robust in-house solution for its services, Tala, too, recognizes the value in these partnerships, Pearsall said. In fact, these collaborations remain pivotal to the firm’s growth, enabling access to new audience segments and facilitating the swift and cost-effective expansion of service offerings for end consumers.
As he noted: “When there’s this pressure toward partnerships, ultimately the customer value proposition should get stronger. And when the customer value proposition gets stronger, good things tend to happen.”
AI and ML Transform Lending
Artificial Intelligence (AI) and machine learning (ML) have emerged as game-changers in the FinTech landscape, and particularly in the emerging market lending space, Pearson said, echoing similar insights shared by Tala Chief Technology and Product Officer Kelly Uphoff in a separate PYMNTS interview.
Across these markets, the complexities of providing real-time, personalized decision-making across diverse languages and cultures pose considerable challenges, especially given the limited data available and often minimal or even nonexistent formal credit histories.
“Sometimes, there’s not even much of an identity history, [however], with the latest advancements in AI and ML, [lending] is getting better, faster, easier,” he said. Pointing to AI-driven platforms like Metaflow, he said these tools have transformed the underwriting process, enabling the swift delivery of personalized decisions in near real time.
Beyond lending, Pearsall said AI and ML advancements promise elevated customer service experiences in the coming year, enabling faster and more personalized responses, which will be critical in catering to millions of emerging markets “coming online and accessing these services digitally for the first time.”
Overall, as 2024 unfolds, the FinTech space is bracing for accelerated advancements, driven by collaborative endeavors, evolving regulations, and AI-powered innovations. These driving forces are set to usher in progressive changes for millions of underserved populations, while opening new avenues for inclusive access across the global financial landscape.
Mobile Helps Brand Loyalty Programs Work Harder and Smarter
Technology, and the digital transformation of the economy overall, have reshaped the concept of customer loyalty.
Add to that the integration of payments innovation, and the loyalty program ecosystem of today is nearly unrecognizable compared to years past.
“The phone has been the cohesive unit that pulls all [this technical innovation] together,” Len Covello, chief technology officer at Engage People, told PYMNTS. “We’ve been hearing the term omnichannel for probably 10-plus years, but we’ve gotten there with the device itself and integrating payments into one-click checkouts and more.”
The smartphone has become the central device that people use to interact socially, at home, on the go and even in stores.
And with ongoing advancements in mobile device technology and payments innovation, loyalty programs have the potential to become even more effective in driving customer retention and reinforcing personal relationships while building lifetime value.
The integration of payments into the smartphone has also played a significant role in enhancing loyalty programs, Covello explained. With a simple click on a phone, customers can now make seamless payments, eliminating the need to wait in queues. They can even pay with their loyalty points or receive personalized offers while making a purchase.
This level of convenience and personalization creates a perfect ecosystem for loyalty transactions.
“We’ve got all the tools available today,” Covello said.
Enhancing Loyalty With Tech and Payments
Loyalty programs have long been a staple in the business world, offering rewards and incentives to customers who repeatedly engage with a brand.
Many brands have already started leveraging digital wallets and contactless payments to enhance the delivery of their loyalty programs.
Starbucks, Covello noted, has successfully implemented this approach. By controlling the entire environment and integrating its loyalty program with its payment terminals, Starbucks has created a seamless and rewarding experience for its customers. Other retailers and brands are following suit, using the data gathered from smartphones to understand customer behaviors and provide personalized offers.
“That device knows a lot about you, and really when we talk about loyalty, that interaction with the loyalty program is about gathering data on the user and gathering behaviors,” he added.
The concept of an ecosystem is crucial in this context. As customers interact with different devices throughout their day, such as smartphones, virtual assistants or even smart vacuums, each device collects data about their preferences and behaviors.
By unifying logins across devices, brands can track customers’ activities and deliver targeted ads and offers. Covello acknowledged that while there may be concerns about privacy, loyalty programs have always been based on the exchange of data for personalized benefits. When done well, this data-driven approach can bring tremendous value to consumers.
Accelerating the Loyalty Partnership
Within this data-rich context, artificial intelligence (AI) and machine learning are becoming instrumental in making sense of the vast amount of data collected by loyalty programs.
By analyzing customer data, AI can identify meaningful patterns and preferences, allowing brands to deliver offers that align with customers’ needs and budgets. Covello pointed out that during the pandemic, loyalty programs focused on providing offers for essential items like gas and groceries, considering the economic uncertainties faced by consumers.
“The advancements of machine learning and AI will help us crunch that data and bring better personalized offers,” he said. “And the more devices we interact with, the more personalized that offer will be.”
Gamification is another aspect that can enhance loyalty programs. By turning the loyalty journey into a game-like experience, brands can make it more engaging and rewarding for customers, Covello said, noting that “rewarding and gamification are essentially one and the same.”
Rewards can take various forms, including points, tiers or exclusive access to limited availability items. Industries that have limited availability, such as shoe companies releasing new products, can particularly benefit from gamifying their loyalty programs, Covello said.
As for what he sees 2024 holding?
“The partnership aspect of things will continue to accelerate,” Covello said, explaining that brands with similar values and target customers will collaborate to offer a more comprehensive loyalty ecosystems.
In an environment where consumers are tightening their belts, brands that can bring value and meaningful partnerships will be successful, he added.
Smart Credit Card Use Turns Debt Burdens Into Financial Flywheels
The holidays can be a stressful time financially for many consumers.
Often, those consumers — particularly those living paycheck to paycheck — turn to their credit cards as an essential financing tool. But these quick-fix expenditures can add up.
“Americans now owe over $1 trillion in, in credit card debt. Credit card balances and interest rates are the highest that they’ve been,” Amber Carroll, senior vice president of membership and lifecycle at LendingClub, told PYMNTS in a conversation unpacking findings from the “New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS Intelligence collaboration with LendingClub that explores how consumers are using credit as inflation continues.
Within today’s challenging environment it is crucial to understand how consumers are utilizing credit cards and the impact it has on their financial well-being.
“More than half of credit cards are held by consumers who are living paycheck to paycheck,” said Carroll, noting that credit cards are being used by this consumer cohort primarily as a financing tool rather than solely for convenience.
Paycheck-to-paycheck consumers prioritize credit lines, rates and fees when selecting credit cards. They are more likely to utilize flexible repayment options and view credit as a means to manage their finances.
On the other hand, Carroll said, consumers who are not living paycheck to paycheck focus more on rewards and may not take advantage of flexible repayment programs as frequently.
“It will be really important to look at what happens with interest rates over the months ahead. An interest rate cut could mean lower monthly payments. And that’s a trend that will certainly help those who are living paycheck to paycheck and using the revolving capabilities on credit cards,” she added.
The Growing Reliance on Credit Cards as a Means to Get By
Despite the challenges associated with credit card debt, the demand for credit cards is expected to remain strong.
“It’s a positive sign to see that even half of consumers living paycheck to paycheck are maintaining high credit scores. This shows that despite a tighter economic lifestyle, they are still prioritizing good credit behavior,” Carroll said.
“The challenge based on the data we see is managing credit utilization. Credit cards can keep many in debt and it’s very easy for that debt to snowball into more debt or longer running revolving debt,” she said, noting that 43% of all cardholders have had a revolving balance on their credit cards at least occasionally in 2023. And that number has increased from 41% in 2022.
That’s why it is essential for consumers to use credit as a tool rather than a crutch. Paying for urgent purchases in full and keeping credit balances below 30% of available credit are recommended strategies to maintain a healthy credit score.
Carroll points out the fact that many consumers say they used debit cards for their last purchase, indicating that paycheck-to-paycheck consumers are trying to live within their means and avoid overextending themselves on credit cards.
However, credit card usage for financing needs is still prevalent, and it is unlikely to change in the near future.
Carroll noted that close to one-third of consumers say they have reached their credit limit, which is an average of $9,200, at least occasionally in the last year, and that amount more than doubles to about 64% for those who are having a hard time paying bills.
Keys to Improving Overall Financial Health for Consumers
For paycheck-to-paycheck consumers looking to improve their credit scores, a combination of financial education, budgeting tools and credit building strategies is essential, Carroll said.
Actively monitoring credit reports, practicing good credit behavior, avoiding overextension and keeping old credit card lines open can all contribute to improving credit scores and overall financial health.
“Having a diverse mix of credit is a great way to show well-rounded responsible credit usage, but avoid applying for too much new credit in a short amount of time as that can appear like you’re desperate for credit,” says Carroll.
“We’re seeing a lot of high credit usage right now. I think looking ahead, hopefully we will be getting some macro relief around interest rates so that folks can start to pay down those balances and get them into reasonable ranges,” she said.