With the increasing presence of artificial intelligence in banking there’s concern that the job market will suffer. Whether AI replaces humans or makes them obsolete in existing roles, there is disruption on the horizon for the banking industry and its job market. But whilst some jobs will be replaced, introduction of AI will open doors for new types of roles.
Artificial intelligence has spread into most areas of our lives, and the latest industry to be impacted is banking. Whilst many decry job loss due to this new technology, others argue that it will in fact open up a whole range of new roles. After all, AI still needs ‘a human touch’ to function at its best. How banking adapts to the challenge of AI could also reveal how the industry will adapt to future technological advances.
Brick and mortar bank closings
At the end of 2017, Royal Bank of Scotland announced closure of 259 branches, eliminating around 680 jobs, in an attempt to reduce costs and encourage users to move to online services. Overall, British banks closed 762 local branches in 2017 – a record number.
Are these closures symptomatic of the new era of artificial intelligence? The World Bank and Citigroup data shows 25 bank branches remain per 100,000 people in the United Kingdom – a significantly reduced number – and yet this is still far off the Nordic countries with around 17 branches per 100,000 people.
Nordic countries were early and enthusiastic adopters of new banking technology. Swish, iZettle, and MobilePay come from Denmark, Sweden and Norway, and these nations lead the way in becoming almost completely cashless societies. If dependence on technology for our day-to-day banking needs increases, then the need for physical bank branches will decrease: it’s a clear sign of AI’s impact on the industry.
The future of banking
With serious pressure on banks to innovate, there will undoubtedly be job loss, and not just in physical bank branches. The fear of Fintech taking banking jobs has been rife over the last few years as more agile, innovative startups come onto the market.
Competition from startups such as TransferWise, WorldRemit, Circle and Monzo is growing. These brands are disrupting the notoriously antiquated banking industry, particularly in the money transfer arena. Two-fifths of UK consumers say they have used technology to manage their money and have saved £100 in debt or charges in doing so.
The banking industry is also facing pressure due to innovations in the developing world. In Africa and India, traditional banking often takes a backseat to new, more accessible technology like mobile money, with control of finance going to telcos over major banks.
“Poor countries are jumping ahead of rich ones by building a 21st century infrastructure (because they have little legacy infrastructure to begin with)….Counterintuitive as it may seem, poor countries may be ahead of rich countries in mobile banking,” says Vijay Govindarajan.
“Humans have an important role to play even when we’re surrounded by AI. Human judgment, ethics to assess a situation is really important. AI is a tool.”
What does this mean for banking jobs in the future?
While all of this points to big changes in the industry, it’s clear that humans are still needed to make it work. AI is not infallible, and it has significant parameters that are set by the humans that create it. For instance, Mike Pham wrote in VentureBeat, “Within a day of Microsoft’s AI chatbot Tay being active, it learned from Twitter users how to craft misogynistic, racist, and transphobic tweets. Did Tay learn a conceptual sociohistorical theory of gender or race? I would argue not.”
He goes on: “Machine learning is only as good as the data it is built upon, and when that data is subject to human biases, AI systems inherit these biases.” Humans are needed to do this; there will always be jobs alongside artificial intelligence.
While those who fear the future of AI in the job market believe that in the new world of artificial intelligence, the timeframe in which the job market and its workers need to adapt is much faster than it was in the past, research suggests we can react quickly enough. In a recent report Gartner predicted that whilst AI will eliminate jobs, it will also create them: 1.8 million jobs are at risk from the rise of artificial intelligence, but by 2020 it will have also created 2.3 million new jobs.
Net new jobs created by AI will be up to 2 million in 2025.
“Which jobs will be automated first? The jobs that computers do better than humans. That sounds terrifying, but we are really removing jobs where computers do a better job and humans can move on to do more value-added jobs.”
Whether AI is actively taking over a role, or forcing us to create new ones, it’s clear that it will have a major impact on banking in the coming years. With the addition of fast-growing, disruptive technologies that force incumbents to adapt, and new lines of work made possible by AI, it’s possible that we’ll net positive when the AI revolution has emerged in full swing.