How should banks respond to the challenge posed by the rise of the alternative workforce (i.e. non-permanent and non-salaried)?
The traditional employer-employee relationship is being replaced by the emergence of an alternative workforce – temporary, on-call contract workers, freelancers, independent contractors and gig workers – that leaves no generation untouched. The alternative workforce is expected (according to governments and organisations such as the World Economic Forum) to increase dramatically over the coming years due to a combination of factors, including firms’ cost pressures, technological adoption, and changing workplace cultures.
Whilst the alternative workforce is not new, novel developments are the scale it is reaching and its extension to all income levels. The greatest challenge the alternative workforce presents financial services firms with is income volatility. Many financial services firms – and in particular banks – have not evolved their products fast enough to keep pace with this trend.
If banks do not take further action by offering product and pricing innovation, the rise of the alternative workforce could significantly erode operating profits through its impact on demand for products, including the potential market share loss to new entrants, margin pressure, and eroding customer loyalty. That is, the challenge is how banks can serve the mass market in the future as it becomes increasingly based on the alternative workforce.
Check the latest ECRS Strategic Foresight report "Rise of the alternative workforce: How banks must respond" here.
Unless banks take concerted action soon, the rise of the alternative workforce (i.e. non-permanent and non-salaried) could significantly reduce their operating profits and market share. Banks must use two innovation levers: product and pricing.