Digitization has changed banking forever. Cashless transactions, mobile and online communications, paperless submissions, and automated teller machines (ATMs) have changed the face of banking. Disruption is a norm, and organizations—both large incumbents and financial technology (fintech) start-ups—are creating new markets and controlling consumer experience like never before. According to the Organization for Economic Co-operation and Development’s (OECD) projections, 25% of the workforce is in jobs where a high percentage of tasks could be automated. With artificial intelligence (AI) and robotics, employees at banking centres around the world are wondering: “Will AI take over my banking job? And will my skills still be relevant in the future?”
Components of Digitization in Banks
There are three types of digitization occurring in banks—automation of mundane tasks, historical analysis to improve those tasks, and predictive and cognitive analysis.
Banks have been very good at automating tasks, and improving certain tasks through historical analysis. Have they replaced jobs per se? Based on Aon McLagan’s study of 105 banks in Asia and the Middle East over the last five years, we have seen an increase of 35% in the number of information technology (IT) jobs. At the same time, there is a 14% reduction of operation jobs, which indicates that the continuous focus for banks is on process automation and optimization. However, jobs haven’t gone away; the nature of the jobs has changed.
The most advanced phase of digitization is AI, which includes predictive and cognitive capability. As a result, jobs that don’t require human intervention will start to disappear. Instead, these jobs will be performed by machines designed to react to sets of scenarios.
These jobs include credit analysts and relationship managers. For example: A credit analyst or credit underwriter supports home loan applications and performs a know-your-customer (KYC) routine—which includes verifying if the applicant has any defaults, through credit check, credit history, credit validations, then approve or reject the application. With AI, banks can now perform a credit check and analyse, based on historical data and future trends, the probability of a potential customer defaulting—and all in just nano-seconds. Robo-advisers, cashless transactions, and online and mobile banking have already replaced back-end operational roles, relationship and wealth managers, and remisiers, and reduced the need for branch service staff.
But it’s not all bad news. In a highly competitive industry, banks are turning away from mass marketing and looking towards targeted marketing that matches each customer’s profile and banking habits. Data analysis and data scientists who have both the technical know-how and industry knowledge are critical to creating the predictive models that can enable effective personalized marketing.
Highly-specialized functions, such as those in regulatory and compliance, are also not at risk. The heightened regulatory environment has created a need for greater accountability on banks to rely, not just on systems, but also individuals from within the industry who can look at it in a holistic manner. Regulations are more complex than ever to interpret, and may even have different interpretations in different jurisdictions—making it difficult to delegate the role to autobots or automated systems. Furthermore, the repercussion of regulatory breach is so high—both in terms of reputation and costs—that the risk of failure is likely to prevent the bank from completely automating these tasks.
AI's Bigger Role Within Banks
Jobs that will continue to thrive in banking are those that need skills, despite AI, with human qualities of creativity, strategy, adaptability, interaction, and leadership. Therefore, functions such as sales, human resource (HR), and marketing will still be relevant—although job reconfiguration becomes necessary as AI begins to provide these functions with quicker access to relevant information than ever before.
Leadership and strategic roles will also continue to see a demand in banking. Leaders need understanding of the digital world, where the industry and market is shifting, and where the demographics and competition are moving, so that they can take timely measures to direct their workforce and the business model of the bank in that direction.
As banks continue to reduce costs and increase revenues, AI will play a bigger role in the functioning of the banks, and the skills and roles in this environment that will survive and thrive are the ones that can’t be digitized.