Is The Banking Industry Prepared for a World Without Bankers?

The future of work in financial services is being driven by advanced technology in the form of automation, big data, artificial intelligence, cloud computing, robotics and 5G. These changes in how work is being done, combined with the need to reduce costs, require banks and credit unions to address a skills mismatch that will eliminate many jobs while potentially disrupting those jobs that remain. Are you prepared for the employment impact of the new gig economy?

Sometimes with little fanfare, many financial institutions have announced the elimination of jobs that once were considered stable. For instance, Deutsche Bank announced that it would cut up to 20,000 jobs – or one fifth of its global staff. Similarly, CEO Brian Moynihan said Bank of America has cut 100,000 workers in less than a decade, mostly attributed to the deployment of technology across the organization and the need to cut costs to remain competitive. In fact, Bank of America has stated that artificial intelligence and robotic process automation has helped their investment divisions cut 84,000 work-hours a year.

Some of these staff reductions have been managed through a firm’s natural attrition rate, which runs roughly 10% a year. At the same time, other employees are either shifted or retrained so that a financial institution can redeploy personnel from parts of the organization deemed obsolete into new positions.

The question becomes, are organizations prepared for a world of banking without bankers (or significantly fewer of them)? Just as importantly, are organizations prepared to retrain or hire people who are prepared to lead and work in financial institutions that are responding to the new future of work in banking?

Digital Transformation and the Future of Work

Digital disruption is the new reality in the banking ecosystem. And, while the increased adoption of AI and robots will not result in the elimination of every job, it is clear that most current jobs will change, requiring individuals at all levels of the financial institution to learn new skills. There are also jobs that could be completely displaced by advanced technology and automation.

For instance, jobs that require a lot of repetitive tasks will most likely be eliminated, if they haven’t been already. Examples include keypunch operators, many back-office finance roles, customer support personnel, and even branch employees. Some may only require a change in skills as opposed to the removal of the job, but that requires retraining. A movement from repetition to more strategic roles that require critical, empathetic thinking or the creative engagement of a human.

The World Development Report 2019 set out to assess the impact of new technologies on employment.In the report, the World Bank emphasized that the nature of work in the future will evolve. They found that while technological advances in automation are handling more and more routine tasks and are in the position to eliminate many low-skill jobs, there are new opportunities being created for different, more productive, strategic and creative jobs.

“This is the fourth industrial revolution, there have been three before, and in each case we managed to survive so it’s not the case that machines completely eliminated humans,” stated the World Bank’s Chief Economist Pinelopi Koujianou Goldberg. “Eventually, we will adjust.”

What this means for banking and employees at all levels in the financial services industry is that people and organizations need to rethink roles starting now. This also means that people will need to embrace the inevitable change and learn the skills needed to take on this change. Only then will organizations and individuals be prepared to turn this challenge into an opportunity.

The Socioeconomic Impact of Digital Transformation

In the future, workers are not only likely to have many jobs over the course of their careers, but many may also serve as independent contractors to many organizations at the same time. Some individuals may opt for becoming a technology specialist, such as being a coding expert, while others will leverage advanced cognitive skills, like complex problem-solving, teamwork, reasoning and communication talents.

These changes in the scope and definition of employment will not impact everyone equally. It also will not occur without stress and conflict within organizations and across entire economies. Technological advancements require governments, businesses and academic institutions to develop more educated and highly skilled workforces and protections for employees over time. For instance, the World Bank believes governments should guarantee a universal minimum level of social protection, which could include offering insurance independent of employment due to the potential rapid transition of workers from one job to the next.

Beyond government involvement, financial institution leaders must also quickly address the challenge of long-life training of workforces to keep up with the impact of technological advances. The challenge becomes more acute when you consider that we need to retrain and redeploy tens of millions of mid-career, middle-age workers who falsely believe they are very stable in their current jobs.

According to McKinsey, 62% of executives believe they will need to retrain or replace more than a quarter of their workforce between now and 2023. Many organizations also plan to fill future needs with new employees from the outside. For instance, 35% of American firms thought the challenge of technology impacted jobs would have to be met mainly or exclusively by hiring new talent.

Challenges in Keeping up with Change

Only 16% of private-sector business leaders feel “very prepared” to address potential skills gaps, according to McKinsey, with roughly twice as many feeling either “somewhat unprepared” or “very unprepared.” The majority felt “somewhat prepared.” When asked about barriers they are facing, about one-third of executives believe there is a need to rethink or upgrade their current HR infrastructure.

Not surprisingly, many organizations also are not clear as to how job roles will change and what kind of talent will be needed over the next five to ten years. For instance, 42% of American executives lack a “good understanding of how automation and/or digitization will affect our future skills needs.” In banking, this can be an even greater challenge because many financial organizations have a difficult time thinking outside of what has been done for decades within the legacy banking industry.

Unfortunately, as the banking industry continues to change at an increasingly rapid pace, there are more questions than answers around the future of work in banking. The re-skilling challenge is greater than we have ever seen in history and is approaching faster than any in the past. There is a need to assess each organization’s current talent pool and processes and determine what skills exist and what new skills will be required.

There is then the challenge of determining which future roles can be filled by existing employees and which will require the hiring of new people. And will these people be full-time workers as in the past, or contract workers that have decided to independently serve many firms. Finally, it will be important to determine what public, private or even educational partners might be needed to help chart the path to success.

The final determination will certainly be an organizational structure much different from today, potentially with far fewer employees, performing roles they could not have imagined even a few short years ago.

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