EMPLOYMENT, SKILLS AND EDUCATION
IN U.S. BANKING
Francicso Bosch – Guadanalítica S.A.
Ernesto Bergeron – Cohen Brown Management Group Inc.
Jorge López – Universidad Carlos III Madrid
Madrid, December 2000
EMPLOYMENT, SKILLS AND EDUCATION IN U.S. BANKING
1. - Introduction
This document analyses how the changes in supply and demand for bank services in the USA have led
to changes in the characteristics of the staff hired, against the background of an educational system
gradually offering greater and greater qualification. First, it looks at the environment of banking –
technical change and legal regulation – considered as part of the Finance, Insurance and Real Estate
sector. Next it describes how the changes in the banking services market produce a modification in the
derived demand for staff (or their skills); and finally it examines what is happening to the educational
characteristics of the staff hired, both of those being hired now and future prospects.
In recent decades American banks have hired a growing percentage of graduates, and everything
indicates that this trend will presumably continue in the coming years. The increase in the percentage
of graduates is attributed both to the fact that:
• banks “need” more and more qualified people; the greater complexity of banking activity leads
to a greater demand for economic and financial expertise and types of behaviour in which social
skills occupy a more important place; and
• the growing supply of graduates, who are relatively cheap, start off with broad “general”-type
training, and show good potential for a career in banking.
In this study it is argued that banking has become a “buyers’ market” – buyers who are becoming
gradually more informed. For this reason it is necessary to sell to the customer, and it is no longer
enough to provide them with multiple products and services. What is more, the practice of cross selling
is undoubtedly clumsy in dealing with the demands of a customer base (of an increasingly higher
average educational attainment) aware of the complexity of what is offered by the financial market, not
just the banking market. There are many different product and channel options and while it is efficient
to integrate buying and usage decisions (what, when and how), it is not easy and it requires time to
develop this competence and keep it up to date.
The banking professional has the challenge of acting with the social and communicational skills typical
of relationship banking, while at the same time upholding the habit of a job well done, typical of the
traditional bureaucratic tradition of banking. And this is because both components are basic – along
with greater financial expertise.
This is a challenge that usually meets with only modest success because it is usual to underestimate the
difficulty of financial consolidation implicit in cross selling: being the only supplier of a customer who
has difficulty in understanding and deciding on which products and services to buy and on the
interrelated decisions on their use (how, when and through which channels).
The supply of the educational system has an influence on hiring policies beyond the extent that seems
necessary from either the changes in banking jobs or the skills (or shortcomings) of the graduates.
Banks have traditionally trained their own staff, in both general-type skills and typically banking skills,
including behaviour patterns – predominantly bureaucratic until recently.
Post-secondary students now come to the labour market with general knowledge (e.g. accounting and
financial). However, the educational system does not usually equip students with the social and
communicational skills demanded by, among other activities, banking. Our exposé suggests that the
educational system meets the demands for cognitive skills but not for social and communicational
Perhaps it is possible to speak of a degree of “overqualification” in knowledge and “underqualification”
in relationship behaviour or social skills among the graduates hired by banks, in the light of what is
required nowadays in the jobs that have changed most, those involving relationships with customers.
There are not enough data to assess whether banks hire too many graduates, in the sense that this policy
involves an unnecessary additional cost and a negative repercussion on professional careers. Although
the reality of the banking market also suggests that this hiring policy may be economically correct
when the analysis is broadened to take account of:
• the selection policies and criteria for general management and human resources;
• sociological considerations relating to:
− the growing supply of graduates
− the preferences of a customer base with growing educational attainment.
This study is about U.S. banking. However, in practice, it touches on two different spheres:
• banking in the broad sense, including banks, savings institutions and specialist financial
institutions (from mortgage institutions to brokers)
• banking as part of the overall framework of similar activities (often notably substitutable)
labelled Finance, Insurance and Real Estate.
The description also focuses to a large extent on the case of consumer banking in a broad sense, from
the mass market to private banking. This simplifies the description, without leaving aside important
features. For example, when it is necessary to point out important differences, we speak of the credit
activities of corporate banks.
The description centres on changes that have gained in importance from the 1970s onwards; although
there are references to earlier dates with regard to both innovations and banking regulation. The future
is seen as a continuation of the realities that have already become important; although e-banking is
taken as an example of what is – or is not – another revolution in banking activity and its effects on the
derived demand for staff.
The documentary sources used have been supplemented with interviews and qualitative information
gathered by the authors over more than two decades of banking experience.
2. – Technical Change, Regulation and the Transformation of Banking
U.S. banking has undergone a profound transformation, the first signs of which are to be found in the
1950s, but which continued over the following years. Without exaggeration, over the last forty years
the banking market has done much more then simply getting rid of the century-old regulatory
straitjacket that was affecting its development and worsened with the legislation introduced after the
financial crisis beginning with the Crash of the New York Stock Exchange in 1929.
Exogenous technical change – IT and telecommunications – has played a crucial role in the banking
revolution of the last half-century. Specifically, it would be impossible to explain the following
innovations without it:
1. - the renewal of many – and the new – products and services; e.g. the use of cash cards, or
“multi-product” accounts (bringing together payments, and asset and liability products);
2. - the change in the way services are offered and used, leaving behind the traditional bank
image, operating in real time and using paper as an optional medium; and the appearance of
self-service (e.g. through cash dispensers and Internet);
3. - the role of branches in reducing their function of service-dispensers and increasing their
commercial function of customer aid; the appearance of new channels, such as the telephone,
point of sale terminals (EFTPOS) and Internet, enabling operations distant from offices and
outside office hours.
4. - the changes in bank operations, which have progressed from providing clumsy accounting
information to managing assets and liabilities with daily updated information, and powerful
risk forecasting and management (not just credit risk); management that now treats the
customer as the business unit, without sacrificing management by product.
After the long parenthesis represented by the depression of the 1930s, the growth of the U.S. economy
led to an increase in financial assets and a greater demand for receipt and payment services. Banks
were the main providers of such services, although with important limitations, especially when
compared to the regulations affecting most European banking systems.
Two of these restrictions are especially revealing:
• in the 20th century it became a general rule that banks could not grow outside the state in which
they were based; this prevented interstate branching;
• the Banking Act of 1933 consolidated the complete separation of investment banks from
commercial banks; the latter had to restrict themselves to lending and were not allowed to
participate in underwriting. That is to say, it closed the door on the development of universal
banks similar to those in the majority of continental European countries.
It was precisely this atomised banking system, forced into geographical and risk (through sectoral)
concentration, that faced the challenge of the sixties, in which the process of commercial innovations
began that revolutionised the U.S. banking scene. A revolution that ended with a period in which
banking services were practically those offered by banks and similar institutions – savings and loans
and credit unions.
The growing diversification of products and services and disintermediation led to an increase in non-
banking competitors. So-called globalisation also made its effects felt in the banking services market.
Strictly speaking, it was a move from a regulated supply of banking services to a supply from many
competitors (neither exclusively banks nor financial institutions) to cater for customers’ financial
demands. For this reason it is advisable to look at the market in terms of at least three types of
competitors, grouped together under the statistical heading of Finance, Insurance and Real Estate.
The range of products described above did not lead to the definitive financial consolidation of
customers’ services, even though there were institutions that catered for all customer demands. This
unexploited, or unsuccessfully tackled, opportunity is the key to everything that followed. It was a
situation, however, that eroded the banks’ possibilities of competing, since certain spheres of the
business were forbidden to them while their competitors were allowed to enter their traditional feud.
By the 1980s it had become important and urgent to address the straitjacket regulating banking and
preventing banks from taking on a progressively more competitive market: “More and more, U.S. bank
regulators were faced with choice between regulating less and having less to regulate” (Calomiris,
2000, p. XIV).
Finally, in 1999, the legislators gave those banks that wanted it the freedom to behave as universal
banks: commercial banks can now act as financial intermediaries in the broadest sense. This is one
more reason for treating finance, insurance and real estate as one whole: they are activities whose
interrelationships and complementary aspects result in significant substitutability between competitors
(above all) specializing in one of the three spheres mentioned, in that they offer products that cater to
similar demands or are substitutes, when not complementary.
Typically, a client – either an individual or a legal entity – has a range of transferable and real estate
assets and usually takes into account yields, risks and operating costs. For this reason, maintaining
forced specialisation on the supply side was inefficient and harmful to the competitors thus affected;
and, as a result, it was not beneficial to customers either.
These are the considerations that lead us to treat banking as a subsector of a much broader market that
we suggest should be bound within the limits of what is statistically grouped together under the terms
of finance, insurance and real estate. This reflection is also applicable to employment in banks and to
the role played by the supply of the educational system.
At the same time, unless the contrary is indicated, and in order to make our exposé more efficient, the
term banking will be understood as referring to the whole group of deposit and credit (or mixed deposit
and credit) institutions that make up corporate and commercial banks, savings institutions and credit
unions. The story of the past forty years, and also of the foreseeable future, revolves around the events
in the business of banks attending to individuals – from the mass market to private or trust banking.
The small world of consumer banking is sufficient to appropriate to illustrate the changes to be taken
into account in the analysis of employment in banking and its relation to education. This is
supplemented with specific references to cases that deserve a different treatment, as is the case of
corporate lending management.
In accordance with these guidelines, we will look at the evolution of banking activity as part of the
sector of Finance, Insurance and Real Estate. The chosen data illustrate:
• the growth of the supply of banking services, within the general growth of the sector;
• the growth of employment, with the profound transformation represented by the increase in
management, specialist and sales staff and the reduction of over 10% in administrative and
support staff in less than a decade.
The number of banks, savings institutions and credit unions has fallen since the 1960s and, even more
rapidly, in the 1990s. At the end of the first half of 2000 there were 10,101 banks, 59% fewer than at
the end of 1986, and 1,624 savings institutions, 44.2% fewer than in 1986 (see Fig. 1). These data
contrast with the number of branches, that has grown 3.2% overall: although bank branches have
grown by 23,3%, the number of savings institutions branches has fallen by 56.4% (see Fig. 2). That is
to say, the supply of banking services has increased through branch networks, although the number of
competitors has decreased – due to mergers and acquisitions, among institutions of the same or of
According to the Current Population Survey (CPS), employment in Finance, Insurance and Real Estate
grew from 6.5 million people in 1983 to 8.8 million in 1999: that is, 6.6% of the total working
population (see Table 1). This increase in employment, at 35%, is higher than the 27.1% growth of the
working population of the USA as a whole between 1983 and 1999.
In greater detail, the increase in employment in Finance, Insurance and Real Estate between 1990 and
1996 shows a net growth, after a fall between 1990 and 1992. The breakdown of employment within
the sector over these seven years hardly varied: it fell in Depository Institutions by one percent, to 28%
of jobs in the sector; it rose by one per cent in Insurance Carriers, plus Insurance Agents, Brokers and
Services, which accounted for 31% of jobs in 1986; while Non-Depository Institutions, Security and
Commodity Brokers plus Holding and Other Investment Offices accounted for 20% of jobs, with an
increase of 3 per cent (see Fig. 3).
In banking, in 1998, commercial banks accounted for 71.5% of employment, savings institutions for
12.9%, credit unions for 8.8%, and others (banking and closely related functions, n.e.c.), for 6.7%.
With regard to occupation, there has been a profound transformation in the Finance, Insurance and Real
Estate sector. The CPS figures show that between 1993 and 1999:
• managerial and professional specialist occupations increased from 24.7% to 34.5%;
• sales occupations increased from 23.2% to 33.8%; and
• technical, administrative, support and others fell from 52.1% to 40.3% (see Fig. 4).
The figures available from the American Bankers Association for the different occupations in banking
in 1998 show a different breakdown from those published in the CPS. However, its estimate of the
growth of employment in banking between 1998 and 2008 forecasts:
• an increase in employment in banking of 2.8%;
• a drop in administrative posts of 3.1%, a mixture of
− important reductions in:
* 28.5% in general office clerks
* 28.3% in duplicating, mail and other office machine operators, and
* 6.4% in cashiers;
− in contrast with high growth in:
* 17.9% in office and administrative support supervisors and managers and
* 13.9% in new account clerks, banking; and
• an increase of 10.6% in executive, administrative and managerial posts (see Table 2).
These estimates use categories that are not easy to interpret. In the light of our following exposé, it is
surprising that employment in marketing and sales is estimated to rise by only 45.4% from a current
total of 38,000 persons, unless – as is assumed in this study – only “staff” support personnel are
included in this category, while “line” sales personnel are included in categories such as “new account
clerks, banking”. It is these considerations that lead us to infer that in the future there will be an
increase in jobs in which workers exercise a certain degree of discretion in their work and a reduction
in the jobs typical of banks that used to process information in a more or less routine way.
The above description of trends in banking employment are confirmed by the data on Finance,
Insurance and Real Estate over the past decade: it can observed that the sector is expanding and
changing from a predominantly bureaucratic structure to an occupational structure in which discretion-
type skills, such as decision making or sales, are more and more important.
This outlook of sector growth and occupational transformation, as a result of the opportunities arising
out of exogenous technical change, deregulation, economic growth and commercial innovation,
provides a succinct illustration of the extraordinary evolution of banking seen as part of, and in
competition with, the overall group of institutions that comprise the Finance, Insurance and Real Estate
A century ago, Alfred Marshall described the reality of the market through the analogy of scissors: two
blades, supply and demand – this is the perspective we adopt in this analysis. We shall now go on to
talk about how the supply of banking services has changed in the past forty years.
3. – Diversification and Discrimination in the Supply of Banking Services
In the second half of the 20th century, the supply of banking services was expanded as regards both
asset and liability products and payment systems. Innovation often originated in non-banking
organizations, as was the case of Diners Card in 1956.
However, it was during the 1960s that companies and banks began to learn how to cope in a financial
services market: competition, in products and prices, gradually emerged to the detriment of regulations
that had been designed to achieve (and had achieved) a standardised market for all by reducing
competition and banks’ autonomy to manage their business to a minimum, for the sake of a “solid,
solvent” banking sector.
However, from the 1960s, they began to make the most of loopholes left by the regulations – the
Banking Act or Glass Steagall Act of 1933, Regulation Q on maximum interest rates for deposits and
the Federal Deposit Insurance Corporation – to innovate in asset and liability products and get around
the straitjacket imposed on interest rates.
It is impossible to overestimate the effect innovation in asset and liability products had on the
management of banks’ balances and their ability to compete. As well as this extraordinary
transformation, it was also the appearance of non-banking competitors that encouraged this
diversification of asset and liability products, many of which led to the disintermediation of funds
managed by banks.
The transformation of the supply of products is revealing of the scope of the change, but also indicates
that it was the products that occupied centre-stage. That is to say, product banking still existed, but it
was now possible to glimpse the – as yet unresolved – challenge of customer relationship-centred
banking. It can be said that the latter, in fact, started out with what began to be called “cash
At this point it will be very useful to cite word for word some paragraphs from The Ongoing
Revolution in American Banking, by Arthur F. Burns:
“In the later 1950s somewhat more than half of the assets of commercial banks consisted of
loans: consumer credit, residential mortgages, and –most important- business loans, particularly
short-term loans. Their remaining assets consisted mainly of federal government securities but
also of some securities of state and local governments. The total volume of assets any bank
could acquire depended on the volume of deposits it could attract locally. Banks could,
however, meet rising loan demands by selling off some of their holdings of Treasury securities.
The composition of bank assets thus varied over the business cycle, with loans rising and
investments falling during business expansions and the reverse occurring during recessions
(Burns, 2000, p. 6-7)
…………… ………………………. …………. ……………..
Learning by Banks and Business
A quarter of a century ago, in the early 1960s, the larger, more credit-worthy corporations were
beginning to learn that they often could meet their short-term credit needs more cheaply by
selling commercial paper to other companies, to pension funds, and to other organizations with
temporarily idle cash rather than by borrowing from banks. To be sure the assistance of banks
was still needed; in order to get a high credit rating, commercial paper ordinarily had to be
backed by a bank line of credit –but this assistance was forthcoming. Also, particularly after
interest rates began their extended rise, many businesses discovered the merits of “cash
management”. Instead of letting their deposit balances at banks rise and with variations of their
receipts and payments, they undertook to keep cash at the minimum required for efficient
operations and to invest temporary surpluses in interest-earning money market instruments.
For their part, banks made the monumental discovery that their outstanding loans and
investments need not be constrained to whatever volume of deposits happened to come their
way. Rather, they could attract the funds they wished by issuing negotiable certificates of
deposit (CDs) at competitive interest rates, provided the rates offered did not exceed the
prevailing Reg. Q ceilings. Banks also learned to stretch their available resources by borrowing
“federal funds” from one another; these consisted of deposits that banks held at Federal Reserve
banks as well as deposits of other financial entities that were accorded this privilege.
These and other fund-raising devices, which came to be known as “liability management” by
banks, had far-reaching consequences………..In the new era banks were free to “buy” lendable
funds in the market; they lost no time in doing so and in aggressively searching out profitable
ways to employ their funds at home and abroad.” (Burns, 2000, p.12-13).
“Commercial Banks have become subject to increasing competition from investment banks and
other financial institutions as a result of the growth of “securitization” –a process that consists
of the substitution of marketable securities for the traditional bank loan, either when the
borrowing is first arranged or at a later point.
“A different form of securitization [also emerged], involving the sale of interest in a package of
loans originated by a bank, thrift institution, or other organization. This practice began in
1970…” (Burns, 2000, p. 17-18)
As well as these changes, Regulation Q began to be relaxed in 1973 when the ceilings for short-term
CDs were abolished. In short, the supply of banking products and services had been diversified and the
interest rate again became important in savers’ and investors’ decision making. The inflation that
became a cause of concern to savers and investors heightened the market’s sensitivity to interest rates.
And it is not surprising that, against this background, innovations emerged in the 1980s that would
finally convince the authorities of the advisability of:
• freeing interest rates, and
• abolishing the restrictions suffered by banks in a “borderless” market, in that
competitors had emerged both inside and outside the country.
The appearance of Money Market Funds in the 1970s is another milestone in the same direction. On the
demand side, a growing concern with interest rates, as a result of inflation, coincided with the
predominance, in individuals’ assets, of financial assets (64% in 1982). On the supply side, investment
banks realized that, like mutual funds, or investment funds, for long-term securities, it was possible to
design a formula for short-term securities that were called money market funds (money funds) and
could be sold in relatively small stakes. In this way they could be offered to individuals and compete
favourably with deposits (Ballarín, 1989, p. 24).
Before continuing, it is a good idea to point out that the subtitle in the citation from Burns’ book could
well be extended to “Learning by Banks, Business and Consumers”, for three different reasons:
1) the educational attainment of individuals, on average, increased during the period under
2) the ever more competitive operation of the market and, in particular, the growing variety of
prices and conditions, encouraged (gave an incentive to) the so-called “financial literacy” of
3) companies were managed by people who, independently or as part of the company, were
personal customers demanding financial services.
The above, however, needs to be qualified. The transformation is often overestimated in the following
way: as customers had more and more options and knew more and more about finance, they took more
and more decisions on their own behalf. In this sense the importance of selling to customers was also
heightened, not only because they were no longer “captive clients in a uniform market for all”, but
because they were customers with their own criteria and multiple sources of information.
The overestimation occurs because an increase in the number of options (more competition) does not
necessarily lead to a greater willingness to take independent decisions. Perhaps it is more realistic to
think the opposite. Why? Because customers, in general, do not derive any special pleasure from
managing their financial affairs and, what is more, it takes them time to gather information and form a
criterion in such a complex field as finances. It may be true that that there is a lot of financial self-
medication. But this is what an individual resorts to when he does not have confidence in his financial
doctors, especially to entrust them with “the whole of his health”, as we shall argue later.
The importance of this innovation is illustrated by the cash management account (CMA) introduced by
Merrill Lynch in 1977. This product caused controversy but was extremely successful, as was
confirmed by both the customers that opened one and the competitors that brought out similar products,
as was the case of Citibank, with its Focus account.
The CMA combined, for the first time, all the basic functions of banking in one single product, which
can be summarised as:
• management of term assets
• a means of making payments (a current account)
• management of liquid assets
• financing through the associated credit card.
It is this potential capacity of integrating the services offered to the customer that undoubtedly makes
the CMA the most revolutionary innovation in banking for many decades. It contains the essentials of
“relationship banking”, since it makes it technically possible to move from product management to
customer (and product) management.
However, this account is on “the cutting edge of a receipt and payment systems technology” that at that
time (and even now in the USA) did not provide an electronic receipt and payment system for all
financial transactions or bills. This is a limitation whose importance will be analysed later. The CMA is
also a good indication of how technical and commercial innovation was, in its turn, constrained by
The CMA is also an indication of the fact that it takes years – and a series of changes in the
environment and in the behaviour of competitors and customers – to transform markets. The following
is a citation from E. Ballarín in Estrategias Competitivas para la Banca, which describes the innovation
represented by the CMA from an appropriate perspective, with rigour and in detail:
“The abolition of the system of fixed fees in May 1975 caused a shock in the sector and
led to innovative actions. The most important was the introduction, in 1977, of what is
considered the most controversial financial product of the last ten years: the “Cash Management
Account” (CMA). The success of the idea was astonishing, partly confirmed by the large
number of imitations that continue to proliferate. Today, Merrill Lynch has over a million
CMAs, with an aggregate balance of more than 70,000 million dollars...”
................. ............................... ..........................
The Cash Management Account is a hybrid product that combines the advantages of:
1) A securities account on which credit can be requested (margin account), up to a
maximum of 50% of the value of the securities deposited;
2) a money fund enabling excess liquidity to be put to profitable use;
3) a VISA cash card; and
4) a current account, with access to a credit card to facilitate greater liquidity.
................. ............................... ..........................
To open a CMA requires a minimum of 20,000 dollars, which may be provided in the form of
securities. In accordance with U.S. regulations, the accountholder may obtain a loan of up to
50% of the value of the securities. The excess balances of the account at any given moment,
arising from sales of securities, dividends, interest on bonds or cash contributions, are
automatically invested in a money fund at the beginning of each week. The current account
services are provided by Banc One of Columbus (Ohio), which also processes the VISA card
transactions. The customer can make payments by using the card or by writing cheques. For
this, they have available the cash of the margin account that is waiting to be invested in the
money fund, plus the net value of the investment made in this fund, plus the available portion of
the credit line linked to the securities portfolio. Merrill Lynch receives daily reports, prepared
by Banc One of Columbus, on the customer’s purchases...
...the account combines, to all effects and purposes, the advantages of a current account with the
liquidity and yield of a money fund. What is more, including a securities account goes one step
further towards providing a “centralised assets account” and satisfying one of the desires of
individuals with medium and high wealth. It is not surprising that it should enjoy such a
favourable welcome” (Ballarín, 1985, p. 111-113).
We should mention three other novel items in this process of innovation:
1) in 1982 commercial banks were authorised to offer competitive products – Money Market
Deposit Accounts – with free interest rates, a minimum average balance of 2,500 dollars, a
maximum of six cheques a month, but with no limit on withdrawal of funds in person;
2) since January 1983 commercial banks and savings institutions have been able to offer an
account – called “Super NOW”, similar to the money fund and with no limitation on cheques
3) finally it should be said that in 1986 the last restrictions on the freedom of interest rates
introduced with Regulation Q were lifted.
All of the above illustrates how far diversification and disintermediation have changed the banking
services market. More important examples could be mentioned, including Home Equity Loans,
enabling banks to provide greater credit (against a real estate guarantee), or, if they so wish, it enables
the individual to get extra benefit from their fixed real estate assets, since it offers a “credit policy” at a
more advantageous price than traditional personal consumer loans.
We should, however, add an additional consideration on the transformation of financial – not just
banking – services to companies, since they illustrate the importance of disintermediation and also
show how “cash management” is of interest to everyone – companies, individuals and banks. Thus,
among companies the expression “cash management”, according to Ballarín, describes: “...a set of
services that some commercial banks offer to companies to speed up receipts, delay payments and
control the different cash in hand and at banks accounts, in order to obtain the best possible yield from
the funds invested in them” (Ballarín, 1985, p. 149).
Diversification and disintermediation have radically changed the outlook: both demand and supply
have been transformed. Next we shall see how these occurrences have opened up for customers
unsuspected horizons as a result of “comprehensive management of their financial product and service
demands”, a kind of idyllic state in which the customer is totally satisfied with the financial services
they enjoy... However, it seems that as well as the new technical and commercial supports, important
behavioural changes among employees are also still needed, as well as substantial changes in customer
preferences and behaviour.
4. – From the Demand for Banking Services to Relationship Banking
With formulas such as those offered by the “Super Now Accounts”, customers can manage their
financial demands in a more integrated way. That is to say, they can make the most of the
complementary nature of the products and services to obtain greater benefit from them: higher yield,
less risk and, even, fewer fees and other management costs (including time required, which is
becoming more and more important).
This is an opportunity banks seen ready to make the most of with so-called cross selling: selling to each
customer all the asset, liability and means of payment products they need. This is a profitable approach
for the bank, and advantageous for the customer, as we have just seen.
However, reality does not confirm these expectations. Instead of opting for “financial consolidation”,
individuals prefer a growing number of financial providers, which, on average, increased from 2.7 to
3.2 between 1992 and 1998 (see Fig. 5). This behaviour contrasts with the increase in the number of
people who said they preferred financial consolidation between 1987 and 2000 (see Fig. 6). However, it
is always necessary to be prudent when comparing preferences with behaviour.
Faced with the contrast between what is analytically revealed as financially efficient for the customer
and their behaviour, we must ask ourselves what has gone wrong in cross selling. The report MIXED
MESSAGES. Consumers’ views on Financial Consolidation (Council on Financial Competition)
speaks of “The Promise and the Paradox of Consolidation”.
The above data on individuals’ preferences and behaviour should be supplemented by the information
that cross selling is efficient:
• compared to gaining a new customer
• because it increases earnings with an increase in a customer’s balances
• management cost is reduced as a percentage of resources managed and customers with only one
provider switch institutions less often, which, overall, increases the value of the long-term
customer (see Figs. 7 and 8).
However, it is banks that have the greatest potential for the financial consolidation of customers. The
starting point is good, in that although banks achieve financial consolidation for only a small
percentage of their customers, they have a high penetration in a wide range of products (see Fig. 9).
This impression on banks is confirmed by their having the lowest rejection rate as potential “financial
consolidator” (see Fig. 10), and is strengthened when it is observed that it is banks that have the highest
share-of-wallet potential (see Fig. 11).
The empirical evidence is consistent with what has been expressed analytically. But what are
customers’ arguments for not opting for financial consolidation? Three types of disadvantages:
1. greater risk (of fraud, etc.)
2. unfavourable prices (banks abuse their dominant position over the customer)
3. the provider does not have all suitable capacities (quality and number?) (see Fig. 12).
From the above we can infer that a large proportion of customers are favourable disposed to financial
consolidation, but providers – banks to a lesser extent – are just not up to it. This situation is simply the
banks’ Achilles heel. Especially when we remember that it was back in 1776 that Adam Smith, in The
Wealth of Nations, who made it clear that the specialisation that brings about the division of labour
benefits everyone. This is why “financial doctors” make sense and why “financial self-medication is
Therefore we should ask what is behind the allusions to greater risks, unfavourable prices and
incompetence. Below we refer to two groups of factors that are, to a great extent, behind the complaints
of the customers who oppose financial consolidation. They are factors related to:
• technology and the use of information, and
• the management of the customer-bank relationship.
In the 1970s Citibank emphasised the importance of information technology in banking management,
both to reduce transformation costs and for a suitable, efficient multi-channel distribution (Ballarín,
1989, p. 72). As a consequence, banks made large investments in information systems and continue to
do so today: they have generated marketing information systems, client information systems, they have
developed data mining, etc. In short, they have provided the resources for obtaining detailed – and up-
to-date – information on the customer and the products that they use or that it is thought they should
At the same time, service was infused with new formats. Greater emphasis was placed on
personalisation and sales, while transactional banking and the management of, for example, loan-
related banking operations were automated or mechanised. The figure of the customer manager came to
the fore – relationship account manager is one of the names used for this new occupational figure.
Segmentation of the customer base combined information and analysis with customer profiles that
make possible a service adapted to the choice between price (yield and risk) and service that provides
formulae ranging from the highly personalised treatment of private banking to an extremely
standardised service, supplemented with self-service. The customer relationship managers (CRMs) of
First Union and their modern tools are one example of what banks are doing:
“In addition to relying on its people to further First Union’s customer relationship management
goals, the institution has several technologies that CRMs and other line employees use when
working with customers.
The main tool for the financial center employees is the SOLD (Sales Opportunity and Lead
Development) system. This main-frame-based inhouse-developed system allows financial
centers to look up a customer’s full relationship with First Union, including deposits, loans, and
any other products or services he may use. The system also helps employees determine what the
customer’s next need may be. And, SOLD is a sales management tool, keeping track of sales
referrals and appointments” (Valentine, 1999, p. 64).
Banks, in short, have made a great effort to be able to offer the customer, in an integrated way, their
different (but interdependent) financial demands. But not even this great effort has resulted in the
success of cross selling, which is none other than financial consolidation.
Perhaps we should go one step further in our analysis of the – explicit and implicit – financial demands
of customers. Market innovations and changes in this period have, strictly speaking, focused on
management of the customer’s assets – share of wallet – with an inevitable reference to means of
payment, simply because they cannot be ignored. However, the emphasis has been on keeping costs to
a minimum, without perceiving the importance – in practice – of their key role in the customer’s
Means of payment are associated with cheques, cards, transfers and similar instruments. They are
usually looked on as “the services” offered by banks together with their asset and liability products: a
fund-centred rather than a flow-centred view of financial services. This is a view very typical of a
banking system like the nineteenth-century one, in which receipts and payments were not
comparatively very important, if only because financial flows, except in cash, did not have the same
importance as today, in a much more financial economy.
From this perspective, cross selling suffers from what could be called flow short-sightedness: it does
not see that beyond means of payments there exist receipt and payment flows that are just as important
as the funds managed. What is more, there is no good asset and liability management that does not start
out from the management of fund flows over time. This view is a consequence of understanding the
customer as an economic unit, who has a life cycle with a sequence of receipts and payments – periodic
and non-periodic receipt and payment flows – that are only partly the result of their wealth situation.
This interpretation suggests the great importance of the receipt and payment system of an economy. In
this sense we should apply the words of Arthur F. Burns to all receipts and payments:
“Thus, the Clearing House Interbank Payments System (CHIPS) which was activated in 1970 to
facilitate the rapid international transfer of funds, has proved to be critically important to the
development of the Eurodollar market. Similarly, transactions in U.S. government
securities………..monetary payments have been enormously speeded by the use of electronic transfers
rather than the sending of paper through the mails” (Burns, 1988, p. 83).
In this sense, it is not enough to point out the enormous inefficiency of a paper-based payment system
such as the U.S. one, where cheques, by value, accounted for 49% of payments in 1998, compared to
26% through cards and 19% in cash (see Fig. 13). Processing costs are enormously higher than in an
electronic receipts and payment system, in which cheques are used less, and electronic booking is the
only handling they are subjected to.
But this improvement is not enough, even in an economy like the Spanish one, which operates with a
standardised receipt and payment system, electronically processed and with document truncation, and
shows a key component for financial consolidation: the customer has a main current account which is,
precisely the one that manages most (if not all) of the receipts and payments – periodic and non-
periodic, in cash or through other means of payment, inside and outside the branch, whatever the
It is through the main account that the receipts and payments associated with the customer’s financial
assets and liabilities usually pass, including those related to life and general insurance. For this reason,
financial consolidation (cross selling) is more realistic in these circumstances. Even the concentration
of information can become a favourable argument from the point of view of the customer, who may
think: the bank knows my position and my future prospects and can advise me better than if it has only
This is precisely what is reflected in Figure 14: the advantages of concentrating information that can
lead to greater benefits for the customer, although not necessarily the best prices in all products. This is
because the bank can make use of the records it has on the customer’s financial activities (their receipts
and payments over time). For this reason the Current Account is placed in the centre of the diagram and
from it are projected the flows and its relationships to other products and services.
However, this view is not seen as being very important in the opportunities identified in the report
MIXED MESSAGES. Consumers’ Views on Financial Consolidation. It suggests a choice that does
not seem particularly convincing: a bank can position itself as a product purveyor or as an objective
advisor. Both of these polar positions are unrealistic, as we have seen in the attempts made in the
British market. Moreover, universal banks, which are also advancing in the USA, would not make
much sense if they opted for one of these polar options.
But before we continue we should note that in spite of what has been said about the payment system
existing in Spain, most customers work with at least two banks and one or another insurance company
or other type of financial purveyor in a broad sense. If there is a privileged link – the main account –
between a customer and the first, main banking supplier (and if the information systems on customers
are comparable to those used in the USA), what more is needed for attempts to get customers to accept
financial consolidation to be more successful?
Management of the customer’s relationship with the bank is a failure, despite the excellent information
on the customer’s situation and behaviour. And it is not correct to attribute this only to the lack of a
“relationship or main account”, as illustrated by the Spanish case. It is impossible to argue against the
investments in information systems:
• the transformation cost challenge made them necessary
• customer-centred commercial management demanded them.
The role of bank personnel in contact with the customer is also a key element in this apparent riddle.
Advanced technical tools are now necessary to survive in the banking market, but the role of human
resources is no less important. It is only too well understood that in a complicated interactive service
such as banking, the employee and customer must be able to understand each other, and this is not
probable if their relationship is not based on mutual trust.
5. – From Delivering to Servicing “Cross Buying/Using” Customers
It is taken for granted that until recently banks provided or delivered services to their customers.
Growing competition brought differentiation and diversification, which encouraged customers to get
their own information on both products and suppliers, that is to gather suitable information so as to be
able to take satisfactory buying decisions.
This procedure made sense as long as the supply was not very varied and for customers with simple
financial demands. When these conditions do not exist, which is the most common case nowadays, the
customer is faced with a difficult challenge: how to take appropriate buying decisions based on:
• complex information on
− the products to be bought
− how to use the products (including the choice of channel in each case)
• their own personal values and preferences.
The customer must become familiar with means of payment, savings, investment and credit products,
insurance – and real estate assets. These are products whose interdependence is often complex and not
always explicit. It is no wonder that financial decisions should take into account at least three types of
variable: yield, risk and costs (direct costs such as fees and indirect costs such as time).
This is a good point to refer to the educational attainment of individuals, since it is important to avoid
using it as a brush to sweep away the objections to cross selling’s (and financial consolidation’s) lack
of success. It is true that, on average, customers are better educated, better informed from a banking
point of view, and even more “financially literate”. That is to say they have greater criterion and ability
to take decisions, even complex decisions. This is not the same thing as saying that most of them prefer
to do this, except as the lesser of two evils, which is the thesis upheld in these pages. Division of labour
and the subsequent specialisation in financial advising (as an alternative to “non-expert self-
medication”) is what seems to result from the growing complexity in financial supply.
This complexity is objectified and simplified through packages defined on the basis of customer
typologies or segmentation. This is a very important step, since it reduces the customer universe to a
more straightforward, and even simpler, reality. However, this device in itself is only part of the
This is because typologies are one thing, however representative they may be of the customer base,
their preferences and behaviour, and quite another the customer’s feeling that their case is unique and
that it is vital for them that their case should be understood and lead to a suitable recommendation. This
approach does not exclude the fact that there may be customers (although not many) inclined towards
“pure self-service” or financial autonomy and who are therefore ideal for Internet banking, without the
support of any human channel, such as, for example, the telephone.
This feeling of their uniqueness of demand occurs in both their purchase and use of products and
services. For this reason we suggest the use of the label “cross buying/using” in contrast to cross
selling. There are three differences in emphasis:
1) for the customer more than for the bank, financial consolidation is a great opportunity and a
novel, complex challenge:
a. it promises more efficient, more profitable and less risky management than being served by
multiple suppliers; but
b. the customer must:
i. assess the interdependence between the buying decisions, use of products and use of
ii. learn from use and, generally, observe how their preferences and level of satisfaction
evolve, even when the service has not objectively changed during the period under
2) the customers’ major problem lies in their sense of the uniqueness and complexity of their
demand, while the seller’s challenge is comparatively smaller and:
a. does not lie so much in being able to convey the benefits of consolidation since they know
their customers are normal (they have prototypical profiles) even though they may reveal
their demands in assorted different ways, if not inconsistently
b. but rather their great challenge is to win the customer’s trust and turn the perceived
uniqueness of the case into the most suitable recommendation on the purchase and use of
products and channels.
From this perspective it is easier to understand the difficulties of banks and their competitors in
achieving their customers’ financial consolidation. Cross selling is generally carried out as an exercise
in selling products:
• on the basis of a realistic supposition: the customer needs asset, liability and means of payment
• but not enough importance is usually attached to the uniqueness felt by the customer, which is
presumably not so subjective. This underestimation is probably a result of the combination of:
o the difficulty of transmitting and managing a customer’s flows and funds with a long-
term perspective, a perspective that is essential for properly materialising the advantages
o this is probably not so much to do with the great variety of solutions possible as with the
difficulty faced by the employee in:
getting the right idea of the flows and funds (over time), and especially
interpreting the customer’s preferences and values.
The above indicates that the innovations mentioned have transformed the market more profoundly than
is generally supposed by:
• turning banking into a technology-intensive industry;
• changing customers’ opportunities and potential demands radically
− opportunities that customers cannot usually resolve, and so
− the relationship staff, whom we shall call account managers, have become key elements in
present and future banking;
• making it possible for banks to manage their customers through financial consolidation and to
make what is imprecisely defined as “relationship banking” come true through a combination
− an intensive use of investments in physical capital and systems, which provide for the
production and distribution processes and procedures (including sales, which is one of their
components and not an autonomous reality essentially different from the rest), and
− banking staff, or human capital, who have an unbeatable comparative advantage in
managing personalised relationships; and of these, counselling is the part with the greatest
added value and is a complement to the information systems.
In short, whatever label is used – relationship banking, financial consolidation, or cross buying/using
customers – the banking staff that attends to customers face different tasks from those of only a few
Below we shall analyse how far this transformation of the banking business has affected the skills
demanded of banking staff. Strictly speaking, we shall see how technical change, the deregulation of
the sector and commercial innovations:
• have transformed the relationship between banking staff and customers, and
• how they have led – or should lead – to new processes and procedures, duly standardised.
6. – The Derived Demand for Banker Skills
In section 2 we indicated that employment in banking had changed considerably: fewer staff carrying
out bureaucratic tasks and more carrying out tasks with a greater degree of responsibility, discretion, or
both. Very succinctly, we shall now describe what we consider as basic in the changes that have taken
place in the past decades in the skills demanded of banking personnel.
In 1970, the activity of a commercial bank was taken care of by a staff that could be broken down into
six occupational levels:
1) the managers: they had become generalists, typically starting out from a professional career
begun in the bank including a stage as lending specialists;
2) the loan officers, the most expert and specialist personnel in banking, generally trained by
the bank itself (although not necessarily on the job);
3) the bank clerks, who constituted the cogs in the processing of information and had the
chance of making a career in the bank;
4) the cashiers employed in transactional banking, with few qualifications, generally without
the chance of making a career in the bank and with high turnover;
5) a mixed bag, made up above all of varied service personnel with very low qualifications;
6) a small group of highly qualified people, among them lawyers and a nascent group of IT
At present, these groupings are still useful, but their relative importance has changed and in some of
them the new functions demand important changes in skills and behaviour:
1) the managers are more generalist, if that is possible, but with a greater element of social
skills both for managing their team and for attending to customers;
2) the loan officers handle more and more complex information, including support for analysis
tools; in the end, however, as before, their work requires above all good evaluation criteria;
on the other hand this figure is tending to be replaced by customer managers, and so the
element of social skills demanded in these occupations is also increasing;
3) the number of bank clerks strictly speaking is falling and those that remain are undergoing
perhaps the most profound transformation: they are required to stop being bureaucrats – “it
is not enough to do their work well” – and also, or rather above all, they must sell to
customers; this is euphemistically posed as the need to combine good service with sales,
since it is on this that the survival of the bank depends;
4) the counter staff continue to work in transactional banking, but are recognised as making a
greater contribution in that they are the people who most often deal with customers;
therefore, the importance of social skills, and, in particular, of dealing with people, is also
growing. In this category we should include telephone operators, who are often placed
closer to counter staff than to qualified clerks, which would make more sense, and who:
a. more and more are carrying out an important function of customer service,
b. or of sales, or a combination of both;
5) the size of the “mixed bag” group is falling due to both mechanization and outsourcing;
6) the number and variety of experts is growing, above all those related to information systems
This brief – and conventional – description is not applicable to investment banking, to trust banking
and to bankers dealing with large companies. In these three cases, as well as a greater emphasis on
social skills, they also need greater skills related to customer and product management. Specifically, we
should point out that the work of the new group of loan officers with functions of relationship
managers, or vice versa, combines, to a greater extent than a few decades ago:
1. computer-assisted instruments and procedures;
2. more complex analytical and problem-solving skills;
3. listening and counselling skills;
4. evaluation and decision-making skills, to the extent that when a counsellor advises a customer
they must opt for a recommended formula as preferable to the others.
We should, however, look more closely at sales skills, which act as a basis for “cross buying/using” or
customer management. Cross selling is usually based on product knowledge, understanding and
managing product packages in terms of segment typologies and being able to deal appropriately with
customers. This is a more complex set of tasks than that entrusted to a traditional administrative
employee, but can be carried out by a person who has completed their training at school with specific
training learnt in the bank.
Strictly speaking, within the sense of a “job well done” by a lifelong bank clerk, selling, understood as
a process, with an appropriately specified procedure, changes the basic skills required. This is not the
case with conventional administrative tasks, as can be seen in the following citation from 1985:
“Putting it differently, clerical tasks in front-desk jobs do not use new skills. The skill – the
general skill – required before, and after, the introduction of electronic technology is the ability
to obtain solutions of informational nature through standard procedures. What has changed is
merely the applied information needed to perform the job, in so far as it is equipment specific.
However, this information acquisition involves specific training to replace the practices
connected with the old technology and it does not require new skills
What demands new skills from job incumbents of front-desk jobs is the selling task. To start
with, selling can be viewed as an information problem that involves the matching of a set of
possible product-mixes to heterogeneous demands from customers. Selling requires solving this
problem by the employee. The solution to the selling problem is complicated by the fact that the
seller has to explore the range of available options and take the customer inquiry as a much
more general matter than a request for a mere predetermined information. The seller has to
suggest an arrangement that is both satisfactory to the customer and profitable to the bank. But,
the selling task is not just solving a pre-specified problem. It also involves transmitting and
persuading –advising- the customer that the suggested offer is the most adequate. In short, the
selling task demands analytical and communications skills that were not required for clerical
tasks. In the old setting the interface between the customer and the employee, involved a less
sophisticated level of communication skills, as exchanges were predetermined, and the solution
given in most cases. Moreover, cross-selling techniques (selling several products to a customer)
emphasizes the understanding of the interdependency among financial services. Besides, the
selling task is closely associated with the quality of service because it is not easy: 1) to identify
the standards of quality of service expected by customers, and 2) to enforce and control these
standards of performance of front-desk personnel. And it is because of these ambiguities, and
the high cost of controlling performance, that the quality of service is in general a major
concern on front-desk jobs [the italics were not in the original text] (Bosch, 1985, p. 11-12).
Fifteen years later, this description of sales tasks deserves to be reviewed, precisely because of what
has been highlighted in italics. Certain knowledge-related skills are needed for sales. But it is more
important – and more difficult – to acquire selling behaviour: it is not enough to know how to do it, it
has to be done well with each and every customer.
Indeed, the challenge is more behavioural than intellectual. And we can now go further than that
clumsy allusion of 1985 to the relationship between sales and service, and enter the field of processes
and subsequent procedures.
Unfortunately, U.S. banking – and other sectors – consider that sales are predominantly creative rather
than forming a processed structure. This is a basic error that continues to distort a great deal of sales
activity. People speak of the process or stages of “selling” (e.g. arousing interest, overcoming
objections and closing the operation), but in contrast do not define, or systematically execute, the
procedure – the specific behaviour – a salesman must follow. The sequence of conducts from the
moment an employee enters into contact with a customer (current or potential) to the moment they say
goodbye are not usually defined.
This view of sales is doubly unfortunate:
1. because it leaves to the discretion of employees conducts that could be provided to them in a
well-defined through the corresponding training, and this generates anxiety, uncertainty and
2. with this way of promoting the sales action, a large part of banking tradition, typical of any
bureaucratic organisation that handles information reliably, has been lost: the sense of – and
obsession with – doing things well, of respect for and appreciation of procedure, a culture that
permeated through to new employees. Procedure and its fulfilment (behaviours) are the
touchstones of satisfactory service.
From the above we can infer how important are the behaviours that reflect a culture of work well done.
This is the case of behaviour-referred sales that systematically cater to the customer’s intellectual (and
emotional) challenge of what to buy and how, and where and when to use it. In other words, the
emphasis shifts from “selling several products” to how to behave in order to gain the customer’s
confidence and recommend what is most suitable for him or her.
Behaviours that generate confidence. That is the question. For this reason it is a good idea to go beyond
the so-called association between service and sales: service and sales are the same – if you wish, parts
of a whole – from the moment when the customer considers that there is an essential interdependence
between the purchase and the use of products and services. The customer manager must treat them as
one whole, because that is the way the customer perceives them. This is essential because: banking
exists in a buyers’ market and is no longer an industry dominated by supply and its patterns. In this
sense “cross selling of products” is a relic of a past that resists giving way to a type of banking that
does indeed revolve around the customer. A customer that would be very well served by a bank that
really knew how to sell him or her (and sell is the exact word) financial consolidation.
In short, there are at present more social skills, in the form of specific behaviours, associated with the
occupations in present and future banking. And for certain groups, more skills related to the processing
of financial information, on both products and customers. This brings us to the central question of our
study, which can be subdivided into two:
1. To what extent have the transformations undergone by banking affected its training practices
and altered the educational requirements demanded of its new employees?
2. Has the evolution in the supply of graduates from the educational system affected hiring and
bank career policies?
We find the answers to these questions in the following section. Before that, however, we should point
out that since banking employment accounts for less than 2% of total employment in the USA, trends
in employment and personnel policy in banking do not have a substantial impact on the supply of the
7. – The Educational Qualifications of Bankers and the Supply of the Educational System
In the past banks used to train their own staff, either on or off the job. In all cases, experience, or
learning by doing, was doubly important:
1. not everything that had to be done could be learned off the job, or the bank preferred on the job
2. very often it was the behaviours that were understood as important and suitable for each post
that were learned on the job.
The previous section described the demand for skills and below we shall classify them into skills for
solving the two main types of problems identified:
• those associated with information processing
• those resulting from selling.
The usefulness of this approach can be seen when analysing how far banks and the educational system
train for, or develop, the skills mentioned. In this study it is understood that the reality of two decades
ago, as illustrated in the citation following this paragraph, already suggested what today is the general
situation for banking personnel:
• they use additional knowledge, of which the general-type knowledge is provided by the
educational system; and
• new behaviours are demanded, which are not provided by the educational system.
“Taking front-desk jobs as an illustration, it can be argued that clerical skills, when defined as
abilities to solve information problems (handling, computation, and transmission of data using
paper or electronically based supports) can be translated educationally as functional literacy and
the “three RS”. This educational content can be defined as general training, i.e., training in
solving a given type of problems. Whereas the ability to handle equipment of a given maker, or
the paper forms of a particular bank is specific training, since the tasks are based on problems
peculiar to a given organization. This definition of training or education in terms of the
generality of the problem-solving abilities developed is consistent with the views of G. Becker,
who identifies the degree of generality by the number of firms that find the training useful,
whereas here it is suggested that it is a consequence of the degree of generality of the problem-
solving ability. In other words, as a result of defining skills as problem-solving abilities,
education can be classified according to the contents –the type of problems it teaches the
student to solve.
The potential usefulness of this definition can be seen through the analysis of the educational
process and objectives required to develop a given skill. Skills that are pertinent to selling can
be expressed as a combination of: 1) solving an information problem –matching a demand to a
mix of products to be selected from the bank’s product range; 2) being able to handle the human
interface with the customer; and 3) combining them into the ability to advise and persuade the
customer to take the suggested product mix. The solution to the first type of problem to be
solved demands analytical abilities and their development can be taken as a traditional goal of
education, though it is not obvious what part or aspect of education contributes to this.
Moreover, the “art” of persuasion, together with dealing with customers (people) is not just a
matter of cognitive or of manipulative skills. It requires an attitude, a “style” or a behaviour,
that is different from the ability to solve problems. This social skill is not easily translated into
educational specifications adequate to developing this non-cognitive skill” (Bosch, 1985, p.
This citation from 1985 is applicable to the banking personnel of 2000 and of future years: additional
skills are demanded of banking personnel that can be obtained in the workplace or in educational
centres (before and after being hired by a bank). This training situation is closely linked to an important
transformation in banking careers, as summarised in the following description from the Bureau of
“Training and Advancement [in Banking]
Bank tellers and other clerks usually need only a high school education. Most banks seek people
who have good basic math and communication skills, enjoy public contact, and feel comfortable
handling large amounts of money. Through a combination of formal classroom instruction and
on-the-job training under the guidance of an experienced worker, tellers learn the procedures,
rules, and regulations that govern their jobs. Banks encourage upward mobility by providing
access to higher education and other sources of additional training.
Tellers and clerks prepare for positions with more responsibilities by taking courses accredited
by the American Institute of Banking, an educational affiliate of the American Bankers
Association, and the Institute of Financial Education. These organizations have several hundred
chapters in cities across the country and numerous study groups in small communities. Most
banks use the facilities of these organizations, which assist local banks in conducting
cooperative training programs or developing independent programs. Some community colleges
also offer courses for employed tellers and those seeking to become tellers. Taking these
courses can give applicants an advantage over other jobseekers.
Some banks have their own training programs, which result in teller certification. Experienced
tellers qualify for certification by taking required courses and passing examinations.
Experienced tellers and clerks may advance to head teller, new accounts clerk, or customer
service representative. Outstanding tellers who have had some college or specialized training
offered by the banking industry are sometimes promoted to managerial positions.
Workers in executive, administrative, and managerial banking jobs usually have at least a
college degree. A bachelor’s degree in business administration or a liberal arts degree with
business administration courses is suitable preparation, as is a bachelor’s degree in any field
followed by a Master of Business Administration (MBA) degree. Many financial management
positions are filled by promoting experienced, technically skilled professional personnel –for
example, accountants, auditors, budget analysts, credit analysts, insurance analysts, or securities
analysts- or accounting or related department supervisors of large banks.
Financial services sales representatives usually need a college degree; a major or courses in
finance, accounting, economics, marketing, or related fields serve as excellent preparation.
Experience in sales is also very helpful. These workers learn on the job under the supervision of
bank officers. Sales representatives selling securities need to be licensed by the national
Association of Securities.
Advancement to higher-level executive, administrative, managerial, and professional positions
may be accelerated by special study. Banks often provide opportunities for workers to broaden
their knowledge and skills, and they encourage employees to take classes offered by the AIB
and IFE as well as courses at local colleges and universities. In addition, financial management
and banking associations, often in cooperation with colleges and universities, sponsor numerous
national or local training programs. Each of their schools deal with a different phase of financial
management and banking, such as accounting management, budget management, corporate cash
management, financial analysis, international banking, and data processing systems procedures
and management. Employers also sponsor seminars and conferences and provide textbooks and
other educational materials. Many employers pay all or part of the costs for those who
successfully complete courses.
In recent years, the banking field has been revolutionized by technological improvements in
computer and data processing equipment. Knowledge of their application is vital to upgrade
managerial skills and to enhance advancement opportunities”
This description of the relationship between employment and training shows how banking continues to
solve its own specific training, and, to a certain extent, its behavioural training, as in the case of tellers,
or cashiers, while at the same time taking advantage of the educational system to supply the part
represented by general-type knowledge. The importance attached by banking to academic
qualifications is increasing, especially for management and commercial (or relationship) posts, in what
seems to be a recognition of the certification of specific and general-type knowledge.
The average educational attainment of employees in Finance, Insurance and Real Estate was higher
than the average for workers as a whole in the USA in 1996. Hardly any people were employed who
did not have at least a High School certificate, and the percentage of employees with college education
– with or without a degree – was higher. This educational breakdown was practically identical to that in
the banking subsector, excluding Security, Commodity Brokerage & Investment Companies, which
employed much higher percentages of university degrees, both Bachelor and postgraduate (see Table
3). Sufficient data is not available, however, for a historical analysis of the whole sector or of banking
This description, however, clashes with the statements of senior and human resource banking
management. More and more better trained people are still needed, that is to say a greater proportion of
graduates. This does not seem to be inferred from the information presented here. It is another question
as to whether hiring graduates has its advantages, as seen here, which are substantial, as are the
associated costs also.
This is not the same as saying that the banking transformation and the skills demanded require greater
academic training than in the past. This is not the case, because with the personnel policies of the past,
and taking into account the concentration of banks under way, it would be possible to provide suitable
training for staff hired and for those who have joined recently.
Moreover, hiring graduates to a certain extent conveys an implicit message: it is cognitive skills that
are the most important (which is not the same as merely saying they are more important than a few
decades ago), and social-type behaviours are not really important. Another doubt that is difficult to
neutralise is the existence of so many university graduates in relatively flat organisations, with the
subsequent effect on professional career expectations, both for graduates and non-graduates.
The banking managers’ preferences mentioned above usually respond to one or more of the following
1. the growing supply of students obtaining qualifications from the educational system lowers the
cost of hiring graduates (with a full university degree or not) and may reduce training costs
(particularly those of a general kind) Compared to the past, the cost of a graduate has fallen,
compared to that of a non-graduate. That is to say, for a little more money, it is possible to hire
a better trained person with greater potential for learning (above all cognitive learning);
2. the effects of changes in the market and in information systems on the “basic training necessary
for the future” of personnel joining banks is overestimated. And, overestimated or not,
accounting and financial training, for example, can be acquired once the worker has been hired
by the bank (internally or at an external training centre);
3. when almost 30% of young people have a university degree and around 90% have successfully
completed high school, hiring people without qualifications is usually associated with
unnecessary risks. Qualifications become a mixture of a “filter” and an “insurance policy” to
reduce selection errors (and to avoid criticisms of “lack of suitable educational requirements in
the selection procedure”);
4. the preference for a growing number of qualified people is consistent with a customer base – the
U.S. population – whose educational attainment has undergone an extraordinary improvement
in recent decades, as indicated by the percentages observed in the previous point;
5. banking, as a sociological group, may not want to be outdone by other sectors in its proportion
of “highly qualified” employees. This supposition is difficult to verify, but there are many
circumstantial signs to substantiate it.
In short, managers’ preferences for a higher percentage of graduates have an economic foundation.
Whether or not it is the most efficient option is less clear. An estimate of its cost effectiveness,
including the risks of such policies, cannot be limited to simple arithmetic: the assessment contains a
qualitative part and no little conjecture, in that the effects are observed in the long term.
We do not put forward a clear pronouncement on the subject in this study, precisely because of this
unavoidable lack of precision. Although we certainly do not assume that banking is lacking in
graduates. And we must always include the reservation that we are generalising for a sector that ranges
from investment banks, which carry out a comparatively much more complex type of banking than
banks that specialise in consumer banking, for example. For this reason, the proportion of graduates
must undoubtedly be higher in the former than in the latter.
To sum up, the importance held by training in the hiring and promotion of banking staff has been
gradually increasing. This refers to both training received in the general educational system and job-
related and specific supplier-related training.
As for the future, everything seems to indicate that the trends outlined here will continue. However, we
shall also comment on the effect that e-banking may have on the subject. This exercise will help us to
place in perspective changes – such as those related to the purchase, use or sale of products and
services – in what, at first sight, may be considered a revolutionary transformation of the banking
8. – Is E-Banking “Another” Banking Revolution?
E-banking is undoubtedly a major development in banking. It offers easy – and cheap – access to most
banking services at any time and from anywhere. To many, it is not sufficiently user-friendly in dealing
with product information, and even less friendly in handling purchases of complex products such as a
Nonetheless, Internet has stimulated the comparison of offers – prices and other conditions – of
different suppliers. The example of mortgages is revealing: the customer can compare on one single
page the offers of different suppliers. User-friendly or not, easy to analyse or not, the information
available in Internet is extraordinarily better than a customer can obtain by visiting branches or by
Internet is also convenient and efficient for relatively simple transactions. Security issues are probably
no more worrying than, say, card fraud – an important hole in payment system security, after decades
of experience and new technologies.
Even more remarkable is the kind of “great leap forward” offered by e-banking in self-service.
Forerunners such as automatic cash dispensers were extraordinary. But e-banking offers a range of
services, not only greater, but similar to those of a branch office, independent of location or time
limitations. Thus, ease of purchase is complemented by accessibility, which is the true challenge of any
Internet provider wishing to satisfy smart consumers (Montenegro, 2000, p. 11).
The innovation is less revolutionary, however, when compared to the growing availability of phone
(home) banking. Again, this is more limited than e-banking, but makes it possible to overcome the time
and place limitations of a branch office with a broad range of services. This leads us to conclude that e-
banking is simply one more banking channel. A channel in which self-service is more important, but
not uniformly so. This is the key point to its links with the considerations of this study.
In a way, the most innovative element of e-banking is the opportunity it provides for:
1. carrying out transactions through self-service; and
2. as an information channel. Even here, it could be argued that what it offers in this sense is
simply an improvement on traditional paper brochures – a different medium that enables
calculations and simulations (which also appeared, more clumsily, in brochures).
On the other hand, however, e-banking is no improvement on the reality of other channels for
managing what is considered in this study as the most common case: that of a customer who does not
know very well what products or services it would be good for them to buy, with what characteristics,
how and when and through which channels, in order to take most advantage of their receipt and
payment flows in relation to their wealth situation and prospects.
All in all, with the arrival of e-banking, the challenge faced by banking in attaining their customers’
financial consolidation continues, or rather becomes more complicated. Paradoxically, the more
channels a customer has available, the more difficult relationship banking (suitably personalised)
seems. This is the same as calling attention to the fact that the customer manager – the person who first
gains the customer’s trust and then helps them to resolve their doubts and uncertainty about what to
buy and how to use it – is, if anything, more important. This perspective, as we have suggested, unites
sales and service into one single reality: being available to the customer to help them take their
interdependent decisions on the purchase and use of products and access to channels.
There is one important reservation. The customer is gradually coming to expect a broader service than
that provided by the branch office timetable and it is not always worth their while to make the journey
there, whether or not they are e-banking users. This is where phone (home) banking emerges with its
tremendous potential. It is as user-friendly a channel as any other (when it is used properly) and can be
available at any time (although not for the whole range of services).
The label “bricks and clicks” is highly suggestive. As a conclusion to this document we should just like
to note that, as a halfway house, phone, or home, banking should be used as an ideal channel for
counselling the customer, and not just for aggressive sales (never better expressed) or for dealing with
simple enquiries. With this reflection on e-banking, we shall leave for the future the outline we have
drawn in this study, which can be summed up in the following observations:
1. banking personnel, generally speaking, need more social and communicational skills than in the
past, precisely because they are faced with a buyers’ market and they must help these buyers to
opt for what would be for them the advantages of financial consolidation (rather than providing
them, with differing degrees of success, with a simple series of products);
2. the educational system provides the generalist training (economic, financial and management)
but does not transmit the social skills (behaviours) that are demanded;
3. the challenge of financial consolidation is not easy, as demonstrated by the banks’ lack of
success in achieving it. The problem is not the cognitive component itself, but rather because
the proper behaviours to generate trust in the customer, a key variable for financial
consolidation, are not forthcoming (generally because the opportune procedures are not
properly specified either).
4. thus what remains pending is a better specification of the procedures that must guide the
relationship between customer and bank. These procedures will combine different proportions,
according to the different segments, of personalised attention and self-service. This same lack
continues to be observed in e-banking.
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Table 1. Employed Persons in Finance, Insurance and Real Estate 1983 - 1999
1983 1983 1999 1999
Total, 16 years old and over 6511 100% 8815 100%
Managerial and professional speciality occ 1606 25% 3044 35%
Technical, sales and administrative support occ 4408 68% 5024 59%
Technicians and related support occ 115 2% 200 2%
Sales occ 1509 23% 2224 25%
Administrative support occ including clerical 2784 43% 2780 32%
Others 497 8% 567 6%
Source : BLS
Table 2. Employment of Wage and Salary Workers in Banking by Occupation, 1998, and
Projected Change, 1998-2008
(Employment in thousands)
1998 Employment 1998-2008
1999 Number Percent change
All occupations 2,042 100.0 2.8
Administrative support, including clerical 1,351 66.2 -3.1
Bank tellers 542 26.5 -6.4
2% 200 2%
Sales occ 139 6.8 17.9
Office and administrative support supervisors and managers
Others 8% 567 97 4.8 13.9
New account clerks, banking
Loan and credit clerks 87 4.3 5.1
General office clerks 86 4.2 -28.5
Bookkeeping, accounting, and auditing clerks 62 3.0 -9.2
Secretaries 52 2.6 -10.5
Adjustment clerks 43 2.1 21.3
Duplicating, mail, and other office machine operators 27 1.3 -28.3
Bill and account collectors 25 1.2 11.1
Executive, administrative, and managerial 503 24.6 10.6
Loan officers and counselors 116 5.7 12.8
Financial managers 97 4.8 7.2
General managers and top executives 67 3.3 7.9
Accountants and auditors 31 1.5 4.7
Marketing and sales 77 3.8 29.0
Securities, commodities, and financial services sales representatives 38 1.9 45.4
Professional specialty 67 3.3 34.4
Computer systems analysts, engineers, and scientists 45 2.2 48.8
Service 24 1.2 4.4
All other occupations 21 1.0 0.0
Table 3. Employment and Educational Attainment, in 1996 (Annual Averages)
Detailed industry and class of worker Less than a High school Some Master´s degree
high school diploma no college, no Associate Bachelor´s and Doctoral or
diploma college degree degree degree professional
(Both sexes, age 16 and older)
Total 12.9 32.3 20.6 8.1 17.6 8.5
Finance, insurance, & real estate 1.9 31.1 27.6 8.3 25.0 5.9
Banking et al (*) 1.7 30.7 27.2 9.6 25.1 5.8
Security, commodity brokerage, & 1.2 14.8 18.5 5.6 44.8 15.2
Insurance 2.1 28.7 23.4 9.1 29.6 7.1
Real estate, including real-estate 11.3 32.5 24.6 8.3 17.6 5.7
(*) Banking et al. includes: Banking, Savings institutions, includings credit unions, Credit agencies, n.e.c.
Figure 3. Employment in the Financial Sector in the US 1990 and 1996
EMPLOYMENT IN THE FINANCIAL SECTOR IN UNITED STATES 1990
REAL INVESTM TEN
STATE OFFIC ES AD IN
0 4% TIVE AN D
INSURAN EC 2 %
10% N D
CARRIERS SECURITY 7%
0 AN D
EMPLO YMENT IN THE FINANC IAL SEC TO R IN UNITED S TATES
AN O E
D TH R
REAL IN E
V STM N
E T ADM ISTRA
STATE OFFICES TIV AN
20% 4% AUXILIARY
1% DE SITO
N N PO
O DE SITORY
CO M DITY
Source: US Census Bureau.
Figure 4. Employed Persons in Finance, Insurance and Real Estate 1993 and 1999
EMPLO YED PERSO NS IN FINANC E, INSURANC E AND REAL
EMPLO YED PERSO NS IN FINANC E, INSURANC E AND REAL
AN ERIAL AND
Figure 5. The More the Merrier
Mean Number of Providers:
In 1992= 2.7
In 1998= 3.2
Number of Financial Institutios Used by U.S. Households
1992 Versus 1998
No Institutions One or Tw o Three or Four Five or Six Seven or More
Institutions Institutions Institutions Institutions
Source: Federal Reserve.1 992 and 1 998 Survey of Consum Finances
Figure 6. Interest in Consolidation
Appeal of Consolidating Most Products with One
Very 1% Unappealing
Source: American Banker 1987. Survery of Consumer Attitudes
Consumer Attitudes Toward Consolidation, 1987
Source: American Banker 1987. Survey of Consumer Attitudes
Figure 7. It is Significantly cheaper to cross-sell
Estimated Acquisition Cost Advantage, Blended Average of Core Retail Product Set
U.S. $ 63
Cost to Shell New Product to New Customer Cost to Shell New Product to Existing Customer
Source: Wharton Financial Institutions Research Center .
Blades Bank; Oliver W yman &Company: Council on Financial Competition
Figure 8. U.S. Consumer Switching Behaviour, 2000
Q: Have you moved products from one financial institution to another in the past
Percentage of Respondents
Unconsolidated Customers Consolidated* Customers
Source: 2000 Council on
"Consolidated" consumers defined as those Financial
whose financial products are domiciled at only Competition Consolidation
one institution. Survey
Figure 9. First Choice Providers by Financial Product
Percentage of 49.10%
Respondents Citing Named
Transaction Short-Term Mortage*/ Installment Credit Stocks/ Insurance
Account Savings Home Equity Loan Card Bonds/
Account Loan Mutual Funds
Bank Brokerage Insurance
and Com pany
*Mortgage providers not offered as an
Source: 2000 Council on Financial Competition Consolidation Survey
Figure 10. Institution Not Considered for Consolidation*
Bank Credit Saving Investment Mortgage Brokerage Insurance Cred
Union &Loan Company Company Company Company Com
Ap rox ateYe rs inEx nce
p im a iste
>200 >90 >150 >75 >15 >75 >100 >35
*Only those respondents w ho stated consolidation w as appealing
w ere asked w hom they w ould not choose for consolidation Source 2000 Council on Financial Competition Consolidation Surv
Figure 11. Share-of-Wallet Potential by Provider Type
(Consumers Who Would Consider Provider)
Bank Investment Brokerage Insurance Membership Internet Credit Card
Calculation: Sumof all products=(Pe ntageciting w
rce ould conside purcha
a product fromtheprovide x (m dia house
r) e n hold holdings of
product x pe nta of house
rce ge holds holding theproduct)
Figure 12. Key Perceived Disadvantages to
Consolidation (Open-Ended Question)
Lack of Service 1.7%
Lack of Expertise 2.9%
Creates a Monopoly 3.0%
Pricing Cannot Shot for a
Uncompetitive Rates 10.9%
Funds May Be
Incrased Fraud/Breach of
To Risky 32.3%
Respondents allow to give
more than one response. Only
cited. Twenty-sixpercent of
respondents cited no
Source: 2000 Council on Financial Competition Consolidation Survey
Figure 13. U.S. Payment Systems
Dollars Purchase Volume Market Share
Source: Colino, 2000.
Figure 14. The Relationship Account . and Financial Consolidation
• Flow of Funds
• Channel Usage
... a chain reaction
of product sales and Investments Mutual
acquisition can Funds/
begin... Unit Trusts
• Risk Preferences
Demographic Checking/Current • Risk Preferences
Account • Transaction Behavior
Data • Transaction Patterns • Flow of Funds
• Age • Flow of Funds • Channel Usage
• Sex • Purchase Patterns
• Address • Channel Usage Real stateAssets
• House in town
• Countru house
Overdraft Credit Card Mortgage Installment
• Credit History • Credit History • Credit History Loans
• Purchase • Income • Credit History
• Behavior • Debts • Purchase Behavior
• Payment History • Assets
HELOC Insurance P&C (General)
• • Children
• Marital Status
• Home Value
• Employment • Car and Home Value
• Luxury Goods
Source: Adaptation from Council on Financial Competition