Automation has a number of industries concerned these days, and the banking industry is no exception. The rise of automation could reduce up to 30% of bank jobs by 2025 according to a 2016 CITI Bank report (Banking's Uber Moment). The U.S. Bureau of Labor Statistics shows how automation replaces work in almost all job sectors.
Yes, you got that right,
43% in finance and insurance.
If you have a penchant for analytics and have been around enough to witness how many predictions have been so wrong - weather, stocks, and elections - you may be curious to know why is there so much anxiety around automation now? Did the automotive industry kill the equine industry? No. Horses are now used more for recreational purposes than for transportation. The Canada horse population is still more than a million animals supporting more than 150,000 jobs. If automation will force us to make transitions in any industry, what will that transition look like for the banks? How do we prepare ourselves, and what are the opportunities? These are the questions on which we need to focus and not merely news-making stats.
History
Let's remind ourselves that we have been there before. 500 years ago, Queen Elizabeth I refused a patent by William Lee for an automated knitting machine with the claim, “Thou aimest high, Master Lee. Consider thou what the invention could do to my poor subjects. It would assuredly bring to them ruin by depriving them of employment, thus making them beggars.” By the end of the 19th century, there were four times as many factory weavers as there had been in 1830.
Fast forward to the mid 1960s when economists worried “cybernation revolution” would soon take over service industry jobs. Their recommendation was a universal basic income where the government pays everyone a low salary to reduce poverty. Today, the Ontario government proposes the same: basic income of least $1,320 per week replacing social assistance with no-strings attached payments. The fact remains that new products and services have also created jobs that were not available in 1960s thanks to automation. The fastest-growing occupations since the advent of computers have been secretarial, clerical, sales, and other service-industry occupations.
Wells Fargo recently launched 13,000 card-free ATMs for its 20 million mobile customers. We probably won't need as many jobs to support bank cards and cheques in the near future, and instead we will need new jobs to create and support card-free/cheque-free transactions. Do bankers position themselves quickly to remove papers from all mortgage, insurance, statements, and reports? How about digital currency? I bought my first bitcoin for $200 five years ago and now it's more than $2,000 Canadian. It's a simple supply and demand concept. And the world's demands are moving towards a paperless, no bank cards, no cheques, no bills, and all-mobile digital ecosystem.
So, how do we start?
Let's start with D-ICE (Not DICE:-). Deloitte has been rolling out its machine-learning technology, called “D-ICE”. Developed in partnership with Kira Systems, the technology promises to cut down on drudge work across the organization. Kira offers pre-built machine learning models covering due diligence, general commercial, corporate organization, real estate and compliance. Anyone can train additional models that can accurately identify virtually any desired clause. It doesn't have to be D-ICE or Deloitte, but we must reduce routine work.
Creating new 24/7 client services using AI
Soon, conversations between a client and their virtual personal adviser will be accessible through a mobile app around the clock. Clients will be enabled to obtain mortgages, lend money, and make large payments in real time via a messaging platform.
Transition from the pyramid model to a diamond-shaped management
Pyramid models are heavily populated with employees at the bottom. This model tends to rely on staff augmentation with domestic workers to fill in skills gaps. While the pyramid builds valuable client experience and is strong on retained knowledge, it is also costly thanks to hiring a significant class of middle managers. Diamond-shaped models replace the heavy bottom of the pyramid with machines and automation. Many operational activities that were once performed by technical or operational analysts will be performed by automation. Diamond-shaped organizations will need more quality assurance, governance skills, project leads and SMEs (i.e. job opportunities). Top executives will employ data-driven decision-making using analytics software, thereby reducing the need for an extensive human analytic and management infrastructure. WorkFusion created a software that manages projects through a combination of crowd-sourcing (freelance work) and automation.
More Opportunities
There are currently not enough computer security and robotics experts in Canada. We need to enhance cyber security and robotics education curricula, training, and apprenticeship programs. Automation will compensate for some of the deficit but we will still need skilled analysts for the most sophisticated, high-level tasks.
Automation creates new products and opportunities, which creates new jobs even more than before. Yes, some old routine jobs will be gone. But that's just progress. And that's something we hope will never go away.
