Automation has been disrupting various industries for a few decades now, thus reducing the need for human workers. It's the reason why companies like Amazon are spending millions of dollars to retrain employees to take on new roles, even if such initiatives are relatively rare.
Big banks have been pouring billions of dollars towards the development of technology to replace menial jobs in their organizations as well. This could make banking services cheaper, but at the same time there's a workforce the size of a small city that will lose their jobs as a result. A new report by Wells Fargo says US banks will slash more than 200,000 jobs in the next decade. To put this figure in proper context, Wall Street analyst and lead author of the report, Mike Mayo, told the Financial Times that this represents 10 percent of total bank jobs.
The analyst looked at the overall impact technology will have on the banking industry, especially in terms of efficiency. They note that artificial intelligence could reduce mortgage processing costs by 10 to 20 percent, and cloud solutions as well as telemetry-based marketing could provide more savings on top of that.
The banking sector is interesting to analyze because it has the highest spending in technology upgrades of all industries, which is estimated at around $150 billion per year. That's why most of the cuts are expected to be in back offices, call centers, front offices, and branches. The headcount in these departments could decrease anywhere from 20 to 30 percent, paving the way for better ATMs, chatbots, and software tools that assist in the decision-making process.
However, for all the talk about using predictive algorithms and big data to make banking better for customers, the report signals the start of a race to automate everything for the sake of remaining competitive, which is going to impact a significant amount of workers who can't easily find other jobs. The Financial Times notes that Citigroup is also looking to slash "tens of thousands" of jobs, and a former head of Deutsche Bank has warned that as many as half of its 97,000 employees could be replaced by technology.