Banking sector to be culled by automation

Cross-posted from The Conversation:

Deutsche Bank CEO John Cryan has predicted a bonfire of industry jobs as automation takes hold across the finance sector. Every signal is that he will be proved right very soon.

Those roles in finance where the knowledge required is systematic will soon disappear. And it will happen irrespective of how high a level, how highly trained or how experienced the human equivalent may currently be. Regular and repetitive tasks at all levels of an organisation already do not need to be done by humans. The more a job is solely or largely composed of these routines the higher the risk of being replaced by computing power.

The warning signs have been out there for a number of years as enthusiastic reports about artificial intelligence have been tempered with fears about significant job losses in most sectors of the economy.

Many roles have already all but disappeared in the march towards a fully digital economy. Older readers may recall typesetters, typists, and increasingly, switchboard operators and back room postal workers, as work of the last century. And the changing nature of work is relentless.

Banking on jobs

The finance sector was once driven by human judgement and decision making. But slowly, it has changed. One-to-one conversations with your local bank manager were replaced by scripted call centre interactions during the 1990s. Today, increased processing power, massive cloud storage, strong encryption and an increase in the use of blockchain make possible tasks that had previously been seen as too complex for automation to be done quickly and consistently without any human intervention.

Artificial intelligence reduces the need for human work that requires analysis, consistent applications of decisions and judgement calls. These are pivotal actions for many legal and financial activities. Combined, in the background, with blockchain – essentially a publicly shared automated ledger of agreed contracts – arrangements that require some form of trust between two parties will also be able to be completed with little or no human intervention.

Blockchain is the basis of every cryptocurrency – forms of money exchanged online. Banks are slowly working towards ways of embracing these alternative systems. While alternative forms of money attract popular headlines it is the automation behind the scenes that is most compelling aspect for the finance sector. By removing the influence of human decision making from as many processes as possible, a fully digital supply chain can be created. As artificial intelligence learns more about the impact and influence of every process each time it happens, a bank’s efficiency should continuously improve, and profits increase, with fewer and fewer employees.

Protected

In this atmosphere of change to the world of work in banking, however, there are some roles that will prove more resistant to change. Work that is unpredictable or inherently people-focused will survive. Customer service staff will still need to tackle the inevitably complex queries that are the product of the human mind rather than the outcome of algorithms. AI will deal with most enquiries, but will inevitably need to transfer the most cryptic to a human interlocutor. Mortgage decisions, for example, will come as an automatically generated message; more intricate questions will still require face-to-face conversations.

At the other end of the (pay) scale senior executives will continue to steer the direction of their individual organisations, although the nature of their work will subtly change to become technology-based decisions. Executives will find themselves choosing an algorithm instead of directly making a high-risk investment decision, or they may end up selecting an artificial intelligence machine rather than interviewing people to become employees. Reduction in the wage bill at other levels of the business and the increasing significance of the few human decisions that need to be made may even assist in justifying their annual bonuses.

Inevitable change

The traditional banking sector is an obvious area for artificial intelligence and automation to generate competitive advantages for companies. This is a result, in part, of previous reluctance to embrace change. In the late 1990s there was a collective hysteria around the Y2K bug and fear of a wholesale shutdown of computers which failed to cope with the millennium date change. That highlighted the sector’s uneasy relationship with fast-moving technological change. But even this public panic prompted few immediate, practical changes.

Now, mobile app-only banks, with no branches, such as N26 and Monzo, challenge the traditional banking sector and its human resources legacy. Traditional banks are still largely oriented towards humans doing most of its work. In 2016, over 1m people, or 3.1% of the UK workforce, were employed in the finance services sector, which is the biggest tax contributor to the UK economy and the country’s largest exporter. Most predictions claim around 50% of the jobs in the sector will be lost. Depending on who you listen to, this process will take between five and 20 years.

The impact of these changes will be felt across the entire economy. There exists a genuine fear that artificial intelligence, robotics and fully digital businesses may contribute to a significant increase in the gap between rich and poor.

Deutsche Bank’s CEO is being frank about a future where jobs in banking and elsewhere will become ever more scarce as digital business becomes a reality. This realisation has reinvigorated calls for a universal basic income (UBI) or a social dividend in the UK and elsewhere. The proposal has found support with some MEPs as a means to maintain personal levels of prosperity in this new world. Crucially too, the UBI would seek to maintain the foundations of the current Western economy in an era of increasingly fully automated digital businesses – a goal, if achieved, which might also just about keep the current finance and banking sector in business.

Article by Gordon Fletcher and David Kreps from the University of Salford

Comments

  1. Can you jail an AI for corrupted conduct and fraud? Would it even care? The reason why we need human, rather than a machine, is because human have a sense of self preservation.


    • The reason why we need human, rather than a machine, is because human have a sense of self preservation.

      The computer will know when a mission is too important to allow you to jeopardise it.

      • BTW how many Indians do you work with? I’m guessing like me it’s at least 50% of your team..
        Straya! Cry about losing jobs while importing people who can do the ones we need. But house prices aye?

      • Lol yeah, we have replaced loads of low paying unskilled jobs with high paying nerds. Lots of Indians, one of my old teams on a project was the UN. India, Russia, Iran, Egypt, Pakistan, Israel, Australia, Philippines… was a very high performing team too…

    • It must make some people feel warm inside to automate humans out of work. To make the plastic corporate management team toss off behind closed doors at how clever people can be and get nice and excited at the profits they can make and crystallise their bullshit KPIs. To feel “clever”, and boost your self-esteem…the very thing you indirectly/directly achieve by automating work out of reach of the human. Justifying via inevitability is pretty lazy and lame, especially when a human has the ability to say no to automation, since technology is not forcing a human to do anything (yet). I chose to get out of IT for these very reasons. Self-esteem and self-concept via a job is important for a human being. Anyway, each to their own. Food for thought more than a criticism, so no offence intended.

      • “I chose to get out of IT for these very reasons’ did your choice magically make house prices reasonable with income? What do you do now, hire 457s from India? Douchebag

    • Hi Migtronix

      Thanks for the American “Douchebag” comment. Gotta say that insult was pretty funny yet quite shallow and “young”. Anyway, good luck with your projects, your 457s, your colleagues, your automation et al. You sound like a go getter, with a nice pseudo-intellect, maybe throw in a bit of traditional Aspergers typical of an antisocial coder that’s all for communication from a screen over a face to face meet. Says it all really. Hey, maybe you’ll automate yourself out of a job. That’d be a good thing surely. You know, progress is progress. Have a great night. Sleep well on that thought for your job security when automation automates automation – no need for the likes of you. Hysterical. Oh, and your “idiot” comment? Oh please. Grow up coder and get your head out of a screen. Look up for once in 24 hours to view the world through the spectrum of a human rather than an interface. I’m
      in stitches. To reiterate, no offence intended, please read again.

      • “maybe you’ll automate yourself out a job”

        Several already. Got a new better paying one as a result. It’s called taking pride in a JOB well done.

      • “antisocial coder that’s all for communication from a screen over a face to face meet”
        Except my best analysis is done face to face, I don’t call bluffs, I bluff them

  2. Instead of having to deposit and transfer your washed cash via the bank, a drone just picks it up and takes it directly overseas.

  3. Jake GittesMEMBER

    Banking in Australia is catching up. Automation is well advanced in London and New York. Effects on employment and consumption: art, restaurants, hostess industry viz housing costs in London don’t seem to have been analysed. RE agents might be anxious.

    • Correct. As always locals playing catch up because upper management is stolid. The CBA thing hasn’t taken any steam out of the automation angle, if anything it’s accelerated it.

    • Oh, I love me this one:

      >… This realisation has reinvigorated calls for a universal basic income (UBI) or a social dividend in the UK and elsewhere.

      Sooo… up until the knife drew a little bit of blood, it was all “Yeah – get a job, you bums! What UBI? Stay at home and play games?! why don’t you get a job instead of government handout!” … now – it’s all “Wellll… you see… this UBI thing really looks like a spiffing idea…”

  4. Generally I’m sceptical that AI is going to lead to widespread job losses, but the idea that it could lead to millions of out of work bankers makes me hope that I’m wrong.

    • Highly doubt it, without out humans, how are all those fraud loans going to get approved? AI isn’t going to try to get bonuses or meet monthly target. The only way for that to happen is if the management recode the Ai to break the rules, which would completely wipe the plausible deniability of the said manager.

    • These are not mutually exclusive – AI will create lots of jobs, none of them the traditional banker…

    • The talentless IT exec in the gimped up suit and expensive watch that was wined and dined by several AI vendors and who selected one based on nothing more than which vendor’s sales rep showed him/her the best time.

      The more things change, the more they stay the same

  5. UBI is good I reckon especially if this AI thing really gets going and the expected job losses happen. I think we need a land tax as well though so all the tech gains do not flow into land prices leading to further wealth inequality.

  6. Even in a trading role for a fund manager I can see the changes.
    I’d say within a decade the trading teams here will shrink dramatically, to perhaps a third of their size.
    It is all about scalable processes for us now.