💎Unionized: Amazon, Financial Literacy & Banks (10 April 2022)

Be it, students, businesses, or employees—getting organized is a good way to do away with stress.

This week we cover stories around the ongoing unionization efforts in three different domains. Here you go!

Florida became the largest state in the US to make a financial literacy course mandatory for high school graduation. The course will cover basic skills, such as how to manage a bank account, and understand loan or investment products.

Until now, nearly 7 out of 10 students in the U.S. had access to a personal finance class in 2021, but only 1 in 5 would voluntarily opt for the course. Hence the law, may be!

How would it help in the near term?

In 2021, in the USA, the average student loan was USD 37,700, with it being the second-highest consumer debt category—after mortgage debt.

A recent study from Montana University found that high school students who studied personal finance were more likely to make smarter decisions about paying for college and choosing less expensive financing options. Further, it reduced lower-income students’ need to work while in college, which could help them complete their degrees.

How would it help in the long term?

‍- It is generally said, if you teach the kids, you are also teaching the families and communities. And thereby also grooming different generations of financially smart citizens

- With the gig economy culture promoting freelancing instead of permanent jobs, it becomes important for the workers to plan their finances well

- Private pension plans, like NPS in India, where employees can directly contribute, are getting traction. Since these investments serve retirement needs, good to understand how they work

Our take

‍Lack of financial literacy leaves young people unprepared when they face their first financial challenge or economic downturn. And this is true not just for exceptional life events, but even day-to-day dealings—India loses Rs 100 Crore to banking frauds every day.

While the regulators keep coming up with new loan and investment offerings, it is required that there is appropriate awareness too. Naive citizens should not fall victims to the fraudsters or bank executives reeling under sales pressure.

Amazon workers in New York became the first group to vote in favour of unionising at a U.S. facility operated by the country’s largest e-commerce company. The move marks a landmark moment in Amazon's 28-year history.

After a hard-fought battle, the result is a major loss for Amazon, which has used all of its might to keep organized labor off its premises.

Amazon's reaction then and now...

‍It is alleged that Amazon hired an influential consulting firm to thwart the unionization efforts. They delivered anti-union presentations that workers have been required to sit through and also monitored the social media accounts of the workers.

The company has already expressed its disappointment with the union outcome and said it’s considering options like “filing objections based on the inappropriate and undue influence” of the National Labor Relations Board.

Digging in...

‍- Amazon paid their workers too little but complained they had no choice because it had led consumers to expect their goods to be delivered free and superfast

- U.S. labor data showed that Amazon recorded higher injury rates than the national average, and employees stated that the company used to easily fire workers for not meeting performance quotas

- It launched AWS Panorama, a computer vision technology that analysed footage from cameras in workplaces so as to detect when employees were not complying with the rules

Our take

‍An important lesson here is: you can not over-promise customers and deliver it at the cost of your employees. That's not sustainable in the long term. Investors would keep a watch on how Amazon handles the situation—a better way might be to respect the labor union and listen to their demands.

An opportunity for Amazon to act and set the right example of a good employer who is keen on shaping the right working conditions.

Citi, just like many other foreign banks in India, decided to exit the consumer banking business. Axis was very excited about the opportunity and bought it for a whopping sum of Rs.12,325 crore. “A deal like this comes once in a lifetime”—quoted the CEO.

Citi operated in the high-yielding space of credit cards and unsecured loans with good quality clientele ranging from salaried professionals to high net worth individuals. Definitely, a “good-to-have” business for an Indian bank.

The "X" factor

‍As per the Indian Customer satisfaction index, the foreign banks were rated much better than their Indian peers on various fronts like the behavior of staff, ease of understanding of information on products, the competitiveness of interest rates, and more.

Although the survey was conducted a couple of years back, it certainly proved the point that global banks had noteworthy services and hence it got them a higher rank of clients too.

Why are global banks exiting India?

‍- A big struggle is, the difficult compliance rules from RBI, which ask them for higher spends on setting up branches or subsidiaries in India

- Further, poor asset quality in India and banking frauds by the corporates have led to shrinking revenues for the international banks

- Consequently, the global banks now wish to focus more on institutional, qualitative, and higher revenue-generating businesses abroad

Our take

‍While Axis takes over Citi’s business, smooth integration would become very crucial so that the clients at Citi continue to receive the premium services that they have been accustomed to. Three million Citi clients need to share their consent of continuing with Axis bank after-all!

Retaining the right employees and investing on maintaining seamless processes might be the focus for Axis in the near term. Also, this is a great opportunity for the Indian bank to pick up the best practices for its clients so as to level up their banking experience.

In this explainer series, we talk about debunking investment myths where we separate fact from fiction. You will get an understanding of why it is better to start investing early even if it is a small amount, each small step counts.

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