JPMorgan Chase & Co is rolling out a programme called LOXM that executes equities trades so well, it’s replacing the humans who used to do that. Goldman Sachs is in the midst of automating the initial public offering process.
Innovations in financial technology (fintech) are creating competition in fields long dominated by the humans.
Algorithms are being taught to parse troves of data and identify patterns and relationships. The idea is to let machines calculate, for example, the odds that Apple stock will rise a certain amount in coming weeks, or suggest when to load up on gold amid geopolitical upheaval.
More than half of the 160 or so jobs that Goldman Sachs securities division advertised online earlier last year were for tech workers.
Hiromichi Mizuno, chief investment officer of Japan’s Government Pension Investment Fund, the world’s biggest manager of retirement savings, sees the adoption of technology, including artificial intelligence, into all asset classes. He says he wouldn’t be surprised if a lot of people lose their jobs as AI replaces their routine.
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.
When technology takes over, many a 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, thinks developments in technology could see some 30% of banking jobs, mainly in the back-office, disappear in the next five years.
While automation won’t cause mass unemployment, it could boost inequality by shifting work toward creative and decision-making occupations, according to a UK think tank. Low-wage jobs are five times more likely to fall by the wayside than better-salaried posts, leading to a less equal distribution of wealth, income and power, says the Institute for Public Policy Research.
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 AI than European or Asian peers.
Investment gurus like Mizuno still keep their faith in human wisdom. 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.
How to survive Wall Street’s robot revolution?
“Be tech-savvy, be client-savvy or be data-savvy,” says Richard Johnson of Greenwich Associates. In other words, learn to work with the tech.