Banks And The Productivity Mystery

Building and sign bank (done in 3d)

The Banking sector is often the mirror image of how the economy of a given country is fairing, it follows that the banking sector with its challenges to regulation and legacy in IT management and security have much to teach the wider economy.

The great minds have for quite some times pondered on the productivity mystery. Why, in a time of rapid technological change, is productivity stagnant in many advancing economies?

The African economies in particular have continued to be plagued with the problem of productivity, with a widening mismatch between the labour force and the actual skill sets needed in the market. This uninformed mismatch has meant most companies cannot afford the requisite investment for new equipment that can bolster the economy. This being warranted by the fact that most of these technologies are foreign and thus too expensive to acquire.

To best understand the productivity mystery, there are two reasons which often go un-noticed and are pertinent to banks — these will assist us in enunciating the so-called mystery.

The first to consider will be regulation and compliance. We can forgive Banks for assuming that their industry suffers from over regulation and emphasized code of conduct since the financial crisis.

Yet in an in depth analysis it becomes apparent that all industries are enmeshed in a massive regulatory push across areas ranging from data protection to employment law to health and safety. These require not only additional resources to implement but also take out management and employee time filling in spreadsheets in order to comply. Many of these new regulations have noble objectives but they are a direct hit to productivity.

Finally there is the control systems run on IT, this also eats into productivity. These typically involve purchasing and invoice systems that require numerous steps to complete and ask for multiple lines of information. All very nice for the data collectors but they use up lots of staff time. Being that banks are our miniature starting point in understanding the productivity mystery; often the Banks are in the frontline as they are often run on cumbersome IT systems.

The developing economies ought to revisit regulation and loosening it where appropriate. In fact a thorough cost-benefit analysis of regulation and compliance across sectors could produce better outcomes, consume fewer resources and help solve the productivity puzzle.

Moses Wandera

Capitol Biz Imaging Ltd