Yorkshire’s shrinking financial services industry must embrace technology or face decline, a top consultant has warned.
Speaking at the Yorkshire Post Business Club, former high-flying banker Martin Allison delivered a damning assessment on the state of the industry and called for greater collaboration with universities and the digital sector.
“Let’s stop kidding ourselves that we are the largest financial service centre outside London,” said Mr Allison, a consultant at the Big Four accountancy firm PwC.
He said successive waves of consolidation have reduced the number of institutions based in this region.
“What happened to the head offices? What happened to the people, to the head office talent?
“Did we see entrepreneurship really happen in the financial services space?
“I personally did not see as much as I would have liked.”
Mr Allison bemoaned the closure of major international processing centres in Bradford and Leeds, the lack of significant activity in investment banking and private banking in Yorkshire and the retrenchment of private equity houses to Manchester and London.
Against this background, he said technological revolution is transforming the industry, with consumers pulling information onto mobiles and tablets instead of having information pushed out to them by large institutions.
“The joke in the 1970s of the Martini bank – anytime, any place, anywhere – has become a reality,” Mr Allison said.
“The challenge is to move from these legacy operations and infrastructure to become truly customer focused, electronically supported businesses. Financial services businesses must continually learn about computing and technological advances in order to survive and compete.”
He said Yorkshire’s universities have a key role to play in helping banks and building societies adapt to dramatic changes in consumer behaviour and also in identifying new opportunities.
He added: “University research is radically needed to understand where we are, to environmentally scan and find out constantly where the next growth areas are.
“I encourage the universities to do it together and for free.
“This is so important to Yorkshire and indeed the UK economy that councils, councillors and MPs should be demanding this.
“We have pockets of expertise locally, but they are all in silos.”
The White Rose consortium of Leeds, Sheffield and York universities did not respond to calls for comment last night.
Mr Allison said Yorkshire’s digital businesses could also help financial institutions to develop new technology.
“It’s time to get this right,” he added. “Or maybe there’s not enough pain. Maybe there’s not yet enough of a burning platform for change.
“Maybe we will just drift along until someone else takes another piece of our financial services revenue.”
It is thought that financial services businesses in Yorkshire directly employ around 50,000 people.
The region has suffered thousands of job losses since the financial crisis and the subsequent collapse of Halifax Bank of Scotland, Bradford & Bingley and Cattles.
Mr Allison is a former head of international banking services at RBS.
He was followed at yesterday’s event by John Hooper, executive director at National Australia Group Europe, who spoke about the future of the Yorkshire Bank subsidiary.
He also addressed the challenges facing the UK financial services industry, namely the double-dip recession, the collapse in trust in banking resulting from successive scandals, the increasing cost of regulation and growing demands from consumers for improved on-the-go technology.
Mr Hooper said: “There’s a new social operating environment, there’s a different economic operating environment and there’s a profound change to the regulatory environment in which the banks operate. It’s a significant challenge to the banking industry to work out what the successful bank of the future will look like and everybody is struggling with that at the moment.”
He said banking has “created a rod for its own back” and predicted that it will take “a long, long time” to rebuild trust in the sector.
“We are on a long haul,” he said. “The banking industry and our bank has to work very hard to make sure everything it is doing puts customers’ interests foremost.”
On the question of delivering improved technology to customers, Mr Hooper said: “The big challenge we are facing for core banking is the interface between security and availability and that is extraordinarily difficult to bridge.
“All banks are under constant attack from people trying to get into your account. We probably get between 40-80 attacks a week.
“The systems people want to use to look at their money or move their money around or network with other people are not secure.”
He said banks have been slow to understand and adapt to the rise of social networking through websites such as Facebook and Twitter.
Mr Hooper said: “It’s primarily seen as a threat as you go on any social network and look at the level of personal abuse that would be directed at me or another banker... it does not attract you to rush back on again.
“Banks are all struggling with how to interface with the various forms of social media to do something positive when the thing they principally face is this wave of criticism.”
He welcomed the idea of creating collaborative networks of organisations which fund businesses in Yorkshire.
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