Automated finance is expected to cost the banking industry around 30 percent of the sector’s jobs over the next decade, according to a 2016 study by Citigroup.
Debra Walton, founder and former CEO of Nucleas Network and current CCO of Thomas Reuters, says that if she were forced “to pick one significant factor that could potentially have the greatest impact on the financial markets in the future, it would have to be the application and adoption of blockchain technologies,” reports Business Insider.
A blockchain, as it pertains to the finance world, “is like a full history of banking transactions.” It is constantly “growing as ‘completed’ blocks are added to it with a new set of recordings.”
The future of banking is expected to replace “face-to-face savings and investment advice with online, automated guidance and execution,” according to BI. CTO of America Bank David Reilly says that “automation,” is “what will impact finance the most in the next decade.”
Technology is expected to cost “the equivalent of eliminating nearly 2 million jobs,” across the U.S. and Europe, the Journal reports. From bank tellers to dealmakers, blockchain and advancements in mobile and online technology could “threaten the number of financial advisers and analyst jobs.”
The investment banking industry is “where the human element is central to dealmaking, technology will have an impact,” according to Goldman Sachs CIO Martin Chavez. With technological advancements in gathering millions of units of information and calculating trends and risks almost instantaneously, the investment banking world will likely suffer human capital losses to technological substitutes. In fact, the number of trading jobs and dealmaking jobs at the world’s largest investment bank were 14 percent lower in 2014.
The study by Citigroup said that bankers in the U.S. were, “particularly vulnerable to banking job losses, since the pace of banking headcount reductions there had slowed since the financial crisis, and U.S. banks have been slower to close branches.”
Wall Street experts say that firms racing rapidly to “remake themselves as digital companies to cut costs and better serve clients,” according to Bloomberg.
For example, State Bank, a 224 lending firm that is older than locomotive trains, does in excess of 20,000 transactions a day. State Bank’s President Michael Rogers says that “there’s a huge opportunity to digitize that and move it forward electronically,” reports Bloomberg. State Bank had 32,356 employees in 2015, and about one-in-five of those will be out of a job by 2020, according to Rogers.
State Bank is not the only American bank to cut jobs in pursuit of a more digital platform. Bank of America reported in June that it expects to cut “as many as 8,000 more jobs,” as it “transforms its retail financial centers for digital banking.”
Fintech startups — companies that do business based on using software to provide financial services — could be the direct enemy to traditional banking. They raised some $22.3 billion in funding in 2015, a figure up 75 percent from 2014. Fintech is expected to disrupt some 80 percent of the market for consumer banking, the Journal reports.
Ten percent of combined staff (roughly 100,000 jobs) were cut from the top 11 American and European banks in 2015, reports Business Insider. Citigroup analysts noted that, “around 65% of banks’ staff are doing processing work that could be automated in the long term.”
What will come in place of bankers (or at least supplant them in large part at major financial institutions), will be “computer engineers and data scientists,” according to Bloomberg.
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