The fintech revolution has started to disrupt the banking sector. Ever since a new league of financial technology strartups emerged after the 2008 subprime crisis, “fintech” has become the watchword for the digital upheaval that could subvert anachronistic banking practices.
Peer-to-peer lenders now use the Internet to match borrowers with investors, shortening loan approvals time to hours compared with weeks at conventional banks. Online US loan volume is expected to reach $120bn by the end of the decade, up from $20bn in 2015, according to Morgan Stanley. Investment management giants such as BlackRock and Vanguard Group are using algorithms called “robo-advisers” to automatically adjust portfolios in accordance with a customer’s risk preferences.
In the capital markets, startups as well as veterans such as Goldman Sachs Group and the Bank of England are experimenting to see if blockchain can replace existing methods of transmitting assets and currencies.
Fintech, the catch-all label applied to companies using the Internet, mobile phones, cloud computing and blockchain to make banking and investing more efficient, will drive many old-fashioned banks into obsolescence in the next five to 15 years, according to former Barclays CEO Antony Jenkins.
When technology takes over, the sector is legitimately worried that machines will soon make swaths of the workforce obsolete.
Vikram Pandit, who was Citigroup’s chief executive officer from 2007 to 2012, said last week developments in technology could see some 30% of banking jobs, mainly in the back-office, disappear in the next five years. Bank of America said in June it will keep cutting costs by finding more ways technology can replace people. In a March 2016 report, Citigroup estimated a 30% reduction in staff between 2015 and 2025, mainly due to automation in retail banking. It would mean full-time jobs drop by 770,000 in the US and by about 1mn in Europe, Citigroup said.
All hope is not lost, though.
Management consultant Opimas predicts 90,000 people in asset management on the Wall Street (or 30% of those workers) will be replaced by machines by 2025, along with 45,000 jobs in sales and trading, which would amount to a 15% cut. But as many as 27,000 new jobs will be created for technology and data workers. New jobs like machine-learning engineers and data scientists are increasingly in demand. American banks are investing more in artificial intelligence than European or Asian peers, so they will potentially see market share gains in capital markets businesses.
Jamie Dimon, chairman and chief executive officer of the largest US bank, JPMorgan Chase & Co, says technology creates opportunities while keeping costs at bay.
There could still be a strong case for perpetuating the “human touch” as it’ll always be hard to automate empathy or trust. Without customers, after all, banks will have no business.
Here is an inescapable truth for the banking sector: Fintech is here to stay and there is no running away from it. The bottom line, especially for those starting out, is “learn to work with the tech as banks deploy it across their business.”
LEAVE A COMMENT Your email address will not be published. Required fields are marked*
Democrats need to start a real fight on guns
South African democracy survives Zuma presidency
A new version of global co-operation
Olympics a reminder of high stakes in Korean Peninsula
Africa’s manmade water crisis
Classroom desk replaced by IKEA couches
Shale oil resurgence weighs on Opec bid to re-balance market