Wells Fargo report: A.I. will cut 200,000 American bank jobs over next decade
Photo by Aditya Vyas on Unsplash
- Wells Fargo report predicts over 200,000 jobs will be lost.
- The banking industry is investing $150 billion a year into tech.
- Automation technologies are becoming increasingly more sophisticated.
A new era of banking is upon us. The advent and rise of A.I. technological prowess is a force to be reckoned with. No industry is safe: the latest in the crosshairs is the banking industry.
A recent report from analysts at Wells Fargo & Co. estimates that more than 200,000 jobs will be cut over the next decade, as they claim there will be the “greatest transfer from labor to capital” the industry has ever seen.
The financial and banking industry at large has been investing $150 billion annually in tech. This will lead to lower costs as employee compensation accounts for roughly half of all financial firms and bank expenses. Senior analyst at Wells Fargo Securities Mike Mayo figures that branch, call center, and corporate employees will be cut from about a fifth to a third, while tech, sales, and consulting positions will be less affected.
Cuts of this size would whittle down the total amount of bank jobs by 10 percent. Workers in this field should be concerned. But according to Mayo, he also believes that this will usher in a “golden age of banking efficiency.” He added, “It’s been a rocky 25-year marriage for banking and technology but it’s finally getting on course.”
Impact of technology on the banking sector
A majority of customers are already dealing with artificial intelligence and they don’t even know it. Michael Tang, a Deloitte partner who leads the global financial services innovation practice, said in an interview within the report, “We’re already seeing signs of it with chatbots, and some people don’t even know that they’re chatting with an A.I. engine because they’re just answering questions.”
Contact centers are dramatically changing both inside the bank and on the client side. According to the report, front office headcount for investment banking and trading fell for a fifth year in a row in 2018.
The Wells Fargo report joins a rising chorus of bank executives, consulting firms, and other financial executives in predicting large cuts for the banking workforce amidst new automation technology.
Citigroup chief executive Mike Corbat has stated that “tens of thousands” of call center workers will be replaced. Then back in 2017, former Deutsche Bank chief executive John Cryan, warned that half of the bank’s workforce, totaling 97,000, could be on its way out.
Wells Fargo’s team of financial services and technology professionals analyzed the overall impact of technology across the entirety of the U.S. banking system. In their 225-page report, they found that A.I. could reduce mortgage processing costs and also contribute to advanced marketing techniques.
“Banks spend more on tech than any other industry and, therefore, better get their money’s worth,” the report states.
The job loss will be most heavily felt in the back offices, where the report states that job numbers could decrease by between 20 and 30 percent.
This loss of jobs would reverse a long-running trend of net job creation stemming from the U.S. banking industry. Data from the FDIC indicates that the industry has never lost more than 55,000 positions in a single year.
On whether or not banks are ready to start cutting these jobs, Mayo states, “They don’t have a choice. The banking industry is a slower growing industry than it’s been in the past . . . Half of the banks’ costs are compensation, there aren’t many other levers to use.”
Job loss and automation trend in many industries
According to a new study published on September 30 — it was conducted by the Federal Reserve Bank — automation has been a major contributing factor to lessened national income that goes to U.S. workers. In other words, this means employees are less likely to ask or receive significant pay raises out of the fear they’ll lose their jobs to tech.
“The steady decline in the relative prices of robots and automation equipment over the past few decades have made it increasingly profitable to automate. In this environment, workers may be reluctant to ask for significant pay raises out of fear that an employer will replace their jobs with robots,” the economists write.
This partly explains why wage growth has remained steadily weak despite full employment numbers.
We tend to think of banking and financial jobs as having some staying power to ward against the onslaught of automation. These white collar jobs, which are high-income and require advanced skill sets are also at risk.
Today, it’s the banks, but tomorrow it could be any industry. No job or profession is completely protected from the automation wave.
