What do 700,000 Indian bankers do all day?

City & Business
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The Independent Online
THERE were two big banking stories this week. First, the merger of Chase Manhattan and Chemical. Second, the strike by 700,000 bank workers in India. The Americans intend to make their merged banks more profitable by shedding 12,000 workers, or 16 per cent of the combined workforce. If they can do that, with all their computerised efficiency, imagine how many Indians could be put out of work without reducing the effectiveness of their banks one jot.

It is a point worth pondering, because it highlights the future of banks everywhere. There has been a steady reduction in bank employment as computers have replaced people over the past 20 years. When will the process end? To put it another way - what, if any, banking operations cannot be computerised?

Clearly, all retail branches can go. Few people now go into banks to withdraw money. Some of us are prepared to trust our cash and cheque deposits to machines, too, though it will be a while before this becomes an automatic habit. We use banks to change money - but cash machines all over the world now give us local currency as easily as the one down the road hands out sterling.

As First Direct and its clones have proved, there are no transactions that cannot be carried out over the phone. Soon we will not use the phone but the computer, and home banking will become irresistibly easy. Last week Bill Gates presented us with his Microsoft Network, which includes a banking service provided by Barclays. Thanks to technical developments associated with the Internet, on-line banking has in less than a year moved from the highly risky to the more-or-less safe (pace Bank of Scotland, which has been running a reliable low-tech computer banking system for years).

Already many specialist services are centralised: ring a local number to inquire about insurance, and you are probably talking to someone 100 miles away. Many of these will be automated completely in the future. You will be able to switch on your computer and interrogate a user-friendly database, probably called something like Vic, who will be at least as effective at selling you insurance, a mortgage or a pension as the real life Vic ever was.

What are you left with? A core of managers who will decide whether or not you can borrow money (come to think of it, computers already do that, too) and a few highly paid people who will offer their expensive advice to business people. They could probably be replaced, too - but they will not be because they are the ones who decide whether to buy the computers.

The question is not how Chase and Chemical manage to find 12,000 jobs to cut, but what the other 63,000 do. For the Indians, who are already leaders in computerised data processing, the prospect must be too alarming to contemplate.

Lessons from Japan

IN THE 1860s, groups of Japanese came to Britain to find out how the world's most powerful manufacturing nation operated. They spent months in the Sunderland shipyards, taking careful notes, and brought the lessons back to Japan. In 1878 a Scot, Henry Dyer, became the first head of the Imperial College of Engineering in Tokyo. We were the teachers, the Japanese were the students; they learnt well.

Twenty years ago the Japanese returned as teachers. They set up factories and taught us how to make TV sets and cars. As teachers, they brought great benefit to the British economy. It was this, rather than the direct effect of their investment, that has made the Anglo-Japanese relationship so fruitful. Do not go to Nissan at Sunderland to learn this, but to Rover in Birmingham or Ford in Dagenham - without Japanese-inspired perfectionism, the British motor industry would not have sailed through the latest recession with such ease.

Mitsui's decision, announced last week, to buy Babcock International's energy division marks a flashback to the days of shipbuilding in the old Queen's reign. Admittedly the Japanese are buying the company, rather than just studying it, but their main aim is to learn about the power generating industry. This is one of the few industrial sectors where they have little expertise of their own - Mitsui uses licensed technology in the equipment it builds in Japan. Babcock, by contrast, is a world leader.

In other words this bit of investment will bring a capital inflow but a knowledge outflow. Should we be bothered by this? Probably not - it is our turn to send a bit of know-how back round the world. But what we should note - and copy - is the relentless way in which the Japanese search for knowledge. The Americans lost out to the Japanese carmakers because they refused to learn from them. As Patrick Tooher notes on page five, at least one German car company has also rested on its laurels for too long. If Volkswagen had shown a little humility 10 years ago, and learnt from the Japanese, it would not be in stuck now.

Hamish McRae, on page four, points out another example of the Japanese willingness to borrow ideas from others. They are apparently looking seriously at Nigel Lawson's corporation tax reforms, and wondering whether to copy them. This shows just how far their open-mindedness stretches. We should not scoff at it, but copy it.

Next in the line of fire

NOW the drought is drawing to an end, we may have to stop bashing water companies and look for some other privately-owned utility to assault. May I suggest it is time the cable companies (modern day utilities if ever there were any) are given a bit of stick? They create havoc digging up our pavements, sometimes without much care and attention, then try to sell us non-stop pap on the telly. If we don't want that, they try to convince us to buy their telephone services - where the service standards are not always all they might be.

I also wonder how committed the cable companies are to telephone. The Government kindly allowed them to offer these services when their television offerings were absolutely dire - and in doing so saved their bacon. But I cannot help feeling that when the pap gets a little less pappy, they will be less keen to sell complex phone lines and much keener to sell easy-to-deliver television.

And as for what some of their directors are being paid - well, my blood is already boiling...

Patrick Hosking is on holiday

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