Automation to replace two-thirds of banking jobs

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The human cost of automation in the banking industry will be dire, says Forrester.
The human cost of automation in the banking industry will be dire, says Forrester.

Automation is expected to have a significant impact on the banking sector job market globally, with two out every three jobs forecast to be taken over by robots in future.

This is according to Oliwia Berdak, principal analyst at research firm Forrester, speaking at an Infosys event in Johannesburg this week.

Discussing the challenges and opportunities presented by automation in the global financial services sector, Berdak explained that while technology had in the past taken the secondary position of supporting the processing of transactions, the latest technologies such as artificial intelligence (AI) and machine learning present a huge threat to employment in the industry.

"The human cost of automation in the banking industry will be massive. Research tells us that for every three jobs, automation is likely to replace an average of two jobs, but in different areas of the organisation.

"Some of the big global banks have up to four million clients, and they are effectively servicing those customers with around 200 employees or so."

While automation brings many opportunities, especially in shedding costs, Berdak pointed out that its human cost will be dire, leaving banks that want to stay ahead of the curve without an option.

"Unfortunately, I don't see any other way around automation of jobs. On the other hand, if banks don't automate, the smaller fintechs will come for them and offer their clients more attractive products."

According to the PwC Global CEO Survey, 41% of South African CEOs expect to reduce headcount due to automation and other technologies over the next 12 months.

An Accenture report predicts that around 5.7 million jobs in SA will be at risk over the next seven years due to digital automation. According to the report, over a third of current jobs in SA are at risk from technologies like robots, AI and machine learning.

Infinite possibilities

There are different equations and models to measure the impact of automation in the financial services industry, and the silver lining is that automation presents limitless opportunities, noted Berdak.

"Automation technologies present an opportunity for banks to upskill and train some of their staff, and also look at how they can improve cognitive skills to help them develop better emotional connections with clients.

"New types of governance structures will emerge, triggering additional data engineering and data science roles, which consist of monitoring AI and machine learning platforms to ensure they don't diverge too much from their main functions.

"So there will be many opportunities presented. The question is: will the banks be in a position to provide full services internally or outsource to service providers? Another question is: how many employees can really be upskilled?"

According to Gartner's 2018 CIO Agenda Survey, 4% of CIOs in cross-sector industries have implemented AI, while 46% have developed plans to do so.

"Despite huge levels of interest in AI technologies, current implementations remain at quite low levels," says Whit Andrews, research vice-president and analyst for Gartner. "However, there is potential for strong growth as CIOs begin piloting AI programmes through a combination of buy, build and outsource efforts."

Additional opportunities to be presented by digital innovations in the banking sector include the ability to provide financial literacy through e-finance platforms, and banks offering clients more tailor-made products and services, Berdak concluded.

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