The long-term trends behind the RBS job losses

It's always sad to see job losses on this scale and (if it's correct) the Finextra calculation that Royal Bank of Scotland has cut 22,600 jobs since the crisis began, helps provide an indication of the human cost of the banking crisis. The problem is that while popular anger at senior banking mangers is in many cases justified, most of those who are losing their jobs are generally people far lower down the organisation who had nothing to do with management decisions.

To see the banking crisis and subsequent nationalisation as the cause, though, is to slightly misunderstand what is going on here. I would argue that the banking crisis has forced retail banks to start looking hard at their front office operations and many have realised that, if this was a retail business, (and to a certain degree it is!) this is not necessarily how a retailer would run things. One consolation for the Edinburgh, Glasgow or Newcastle based staff of Royal Bank of Scotland is that retailers like Tesco Personal Finance have seen the opportunity and are setting up operations to challenge the banks directly (see "Tesco Bank creates 1000 customer service jobs"). For the bank, though, this represents a real challenge as Tesco bring skills in customer service, channel management & distribution and especially in customer analytics that the banks may find hard to build themselves.

The other part of this goes beyond the efficiency of a banking distribution channel. I blogged in February on how Shop Direct had gone from thousands of contact centre employees to hundreds (see "Shop direct cut 1,500 jobs - the internet finally takes its toll").

I suspect the same dynamic is at play for the insurance market. The phone based model of Direct Line and Churchill is costly to operate and under threat from both web aggregators and web only insures such as Swiftcover.com. These are both subjects I've blogged on before here, so I won't cover the ground again. It's also the case that the contact centre infrastructure at RBS Insurance was aging and was likely to need an upgrade. Under cost pressure and a shift in consumer channel usage, the bank has had to cut costs dramatically.

I'm not always a fan of offshoring, but the bank does seem to be approaching it sensibly and moving back-office (presumably non-customer facing) roles offshore. This type of move is where offshoring can be very cost effective without generating the hostility and customer service issues that come with moving a call centre.

To a certain extent, though, the back-office offshoring may well have happened anyway. The big theme here is how the very large onshore call centre handling straightforward transactions is contracting as business moves to the web. Call centes will remain very important for problem resolution, for complex interactions, cross-sell and for high value interactions, but it is clear that the banking crisis has brought forward some of the fundamental changes in banking and insurance channels.