Like all other industries, technology is also disrupting the U.S. banking industry. Artificial intelligence (AI) and banking automation are already beginning to take over banking jobs. Insiders are predicting that thousands of banking industry layoffs may follow in the years to come as robots take over the banking industry.
“There will certainly be job disruption…robots will be able to do everything better than us.” That’s what the visionary futurist and famed founder of Tesla Inc (NASDAQ:TSLA) and SpaceX, Elon Musk, predicts about our future. He believes that robots will eventually take away our jobs and governments may have no choice but to consider offering a universal basic income to their people.
While it may sound farfetched right now, banking industry insiders are already coming out in support of Musk’s idea, with their own warnings on possible job losses. The former CEO of Citigroup Inc (NYSE:C), Vikram Pandit, predicts that about 30% of all banking jobs may vanish in the next five years. What’s more alarming is that jobs ranking low on the income or education scale are not the only ones at the risk of being lost, as is widely believed.
Banking Automation Causing U.S. Job Cuts in 2017
According to a recent study by Bloomberg, some of the highest-paying Wall Street bankers are now also facing the risk of losing their jobs to banking automation. Bloomberg finds that the biggest Wall Street banks like JPMorgan Chase & Co (NYSE:JPM), Goldman Sachs Group Inc (NYSE:GS), Citibank and Wells Fargo & Co (NYSE:WFC) are already employing banking automation, which is beginning to replace human jobs. The use of high-functioning machine learning software is threatening the jobs of many highly qualified analysts, among others.
In fact, today, all major U.S. banks employ robotic process automation (RPA) in one form or the other. Avoiding technical jargon, RPA is simply the use of technology to automate some of the front- and back-office functions which previously required a human to be performed.
Take, for instance, some of the front-end job functions performed by a bank teller, such as account opening or money deposits, withdrawals, and transfers. These functions are now being performed by computers, as banks offer their customers self-serve digital tools, bypassing the need for a teller.
Consequently, as banks are beginning to improve their digital services, fewer and fewer customers are now finding a need to walk into a branch. Bank customers are able to avail the same service online at the ease of a few clicks. As a result, the costs of running a branch are beginning to outweigh the utility or revenue being generated out of it. The trend is forcing major banks to consider closing their underperforming branches.
Take the example of Wells Fargo, which has announced plans to close 450 branches through this year and the next. The other two bigger American banks, JPMorgan and Bank of America Corp (NYSE:BAC), have likewise aggressively trimmed their branch count in the past five years. The two banks have, respectively, closed nine percent and 15% of their branches within the country since 2012.
Overall, three of America’s largest banks have already cut thousands of jobs as a consequence of the branch closures resulting from banking automation.
Apart from the branches, the banks have also been closing their telephonic customer care centers. Banks are heavily investing in their online customer care solutions, particularly through artificially intelligent “chatbots,” to offer answers and solutions to customer problems online.
Bank of America, for instance, has recently introduced its virtual AI assistant, “Erica,” a chatbot that can assist customers, improve their banking experience, and even help them make better financial decisions.
Like Bank of America, other banks have similarly introduced their chatbots for online customer assistance. Because of these artificially intelligent chatbots, the need for customers to call a customer service call center has been greatly reduced. Call center agents are now seeing much lower call volumes, and as a result, their jobs are becoming redundant.
Just earlier this week, we reported of about 460 call center job cuts as Wells Fargo closed its call center in Lehigh Valley, citing lower call volumes as a reason for the layoffs. In fact, this was the second time in two months that Wells Fargo closed a call center for the same reason.
America’s Top Banks Investing in Banking Automation and Artificial Intelligence
With banking giants beginning to invest heavily in banking automation and AI, it seems like Vikran Pandit’s prediction may actually turn out to be true.
Automation is helping the big banks save a lot of time and costs. Tasks which previously took human employees hours to perform are being completed in a matter of seconds now. Take the example of JPMorgan, which has recently introduced a machine learning program called “Contract Intelligence,” which can interpret complex loan contracts within seconds. The same contracts previously took about 360,000 hours for human employees to read and interpret.
JPMorgan, being the biggest U.S. bank and the largest banking sector employer, is leading the front with banking automation. The bank is allocating over $9.0 billion to its technology budget just to improve and automate its banking functions.
The second-largest bank, Bank of America, is right behind, aggressively investing on next-generation technology under the leadership of Chief Technology Officer Cathy Bessant. Bessant has been cutting redundant jobs from her department as she digitizes many of the bank’s operations. Bank of America recently cut a number of tech jobs as it replaced them with automation.
Wells Fargo, following its fake accounts scandal, has similarly been investing on technology and cutting redundant jobs in a push to go digital under its holistic initiative being called “Change for the Better.”
All told, banking automation has turned out to be the leading cause of banking layoffs this year.
“Elon Musk: ‘Robots will be able to do everything better than us’,” CNBC, July 17, 2017.
“Robots Are Coming for These Wall Street Jobs,” Bloomberg, October 18, 2017.
“ROBOTIC PROCESS AUTOMATION The future of technology in financial services,” Accenture PLC, Last accessed October 19, 2017.
“Bank of America launches AI chatbot Erica — here’s what it does,” CNBC, October 24, 2016.
“An AI Completed 360,000 Hours of Finance Work in Just Seconds,” Futurism, March 8, 2017.