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‘The biggest challenge is how to reskill people’: The risks of financial automation

  • "While tellers feared they would lose their jobs to the ATM, the actuality was an increase in employed bank tellers."
  • "The biggest challenge is not necessarily going to be an immediate job disruption but the evolution and change in nature of roles over time."
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‘The biggest challenge is how to reskill people’: The risks of financial automation

Though it’s clear automation will change financial services, it’s not always clear how.

After all, the automated teller machine was arguably the last real innovation that took place in banking. But there are many more, behind-the-scenes processes that can be automated for greater efficiency and cost savings in product control, management reporting, account opening processes and data access initiatives — among many other things.

The ATM is a good example of how exaggerated the threat of new technology can be. It has reduced the number of available teller jobs, and yet banks say tellers are still one of the most important parts of its retail business — their roles are just evolving. Last year Citigroup warned that some 30 percent of bank jobs could be lost between 2015 and 2025 due to retail banking automation. On Wednesday, Deutsche Bank CEO John Cryan said a “big number” of employees will eventually lose their jobs to technology.

We asked financial services executives if the risks of automation in financial services have been exaggerated. Here’s what they said.

Keri Gohman, president, Xero Americas
A lot of people fear machines and applications will take over jobs that before needed human intelligence but that’s not the case. As areas like post-trade processing are automated, bankers can shift their focus to higher-value work like research, brainstorming new ideas and building client relationships. I recently listened to a TED Talk by David Autor, where he discussed what happened when the ATM was first introduced and I think it lends well to what’s currently happening. While tellers feared they would lose their jobs to the ATM, the actuality was an increase in employed bank tellers. The ATM made it cheaper to open bank branches, and in the 45 years since the launch of the ATM, the number of bank teller jobs have doubled and the number of bank branches has increased by 40 percent over the same period.

Kevin Kroen, partner, PwC Financial Services Advisory
I do not think it’s overrated. Financial services institutions are searching for ways to increase their productivity due to an environment where there is relatively low growth across product markets. Automation is being used as the major lever at firms that have exhausted other levers, like location and sourcing strategy. Automation will have a lot of impact; the one caveat I would embed is it will create a lot of new interesting jobs. The biggest challenge is not necessarily going to be an immediate job disruption but the evolution and change in nature of roles over time. A lot of our clients are dealing with how to position this future career path and how to move new hires out of college through the ranks — it’s not necessarily going to be through purely operations roles subject to automation, but through more analytical, thought leader type roles created in the future. The biggest challenge is identifying how to reskill people for those paths.

Jane Barratt, CEO, Goldbean
In the investment space specifically, automation has great benefits, as well as risks. But so does investing through an advisor — hello Bernie Madoff! The question is whether investors understand the risks involved in the strategy they employ. Given there’s yet to be a downmarket in this increasingly automated environment, it’s possible that the risks have been underrated in terms of people’s ability to react to market changes.

Jeffrey Brown, global banking and consulting leader, Genpact
Many banks are overly focused on the technology aspects associated with automation, whereas the human side is equally, if not more, important. Banks’ focus should be less about the tech, and more about how to address important organizational and culture changes. Banks need to consider how automation changes the nature of work for their human employees, and the different forms of operational risk that automation creates.

Jason Bettinger, global director of consumer industries, Cisco Industry Solutions Group 
I don’t think the risk of automation has been over or underrated, but it should be viewed as a necessary risk that financial services firms need to manage. The risk of not automating means being left behind. Automation is also a highly effective way to manage risk, so the benefits far outweigh any additional risks that need to be managed.  It requires replacing or overhauling a company’s legacy technology, which can be an overwhelming, and costly exercise, but the financial services industry doesn’t have much choice or time to make this happen.

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