Job losses in the banking sector have been massive since the 2008 financial crisis – UK banks alone have trimmed more than 186,000 staff. But the next wave of layoffs might not be triggered by a macro-level meltdown, but rather by a surge in new technology led by fintech companies that are both competing against banks and selling them products to streamline their in-house systems.
Either way, fintech start-ups have the potential to put an increasing number of banking professionals out of work by 2020. After all, their raison d’être is to make financial services more efficient by increasing its reliance on technology and reducing its reliance on humans.
“One of the biggest business trends, not just finance, is the increased use of computers to replace people. And as finance is an industry based on data, not physical objects like car manufacturing, I suspect this trend will be even faster in finance,” says Huy Nguyen Trieu, author of the blog Disruptive Finance and an MD at Citi in London.
Which finance roles will be most vulnerable to the rise of the robots within the next five years? “In general terms there are two categories of jobs which fintech start-ups are impacting,” says Markus Gnirck, co-founder and global COO of Startupbootcamp. “First, jobs which focus on data and information and are mainly done by humans now; and second, jobs involving a lot of repetitive processes.”
Jobs in the ‘mass affluent’ wealth management sector – which typically covers clients with $100k to $1m in liquid assets – are already at risk. In the US in particular, customers are increasingly being served by fintech portfolio management platforms which cut out the need for expensive financial advisors and relationship managers. Two of the ‘robo advisory’ leaders, Betterment and Wealthfront, already manage $2.2bn and $2.3bn respectively.
Blue-blooded private bankers seem safe enough for now, especially those with ‘ultra high net worth’ clients (assets over $30m) – new millionaires are being minted faster than banks can recruit relationship managers. “These kind of people still want to pay for a human advisor, but under the million mark the banks I’ve spoken to are getting worried that more clients will leave them for robo advisors, which means fewer jobs in mass-affluent banking,” says Gnirck. “Younger, newly affluent people are also more inclined to use fintech platforms, so the trend is only likely to increase.”
When research analyst ponder possible redundancy it’s mainly to do with a downturn in the sector they cover or an internal upheaval at their bank, but fintech start-ups could also pose a threat to their positions within the next few years, says Cynthia Siantar, co-founder of Singapore fintech firm Call Levels.
“Using humans to identify news and look at data for clients is a very manual process,” she says. “If the client wants, say, five pieces of relevant information per day affecting their asset class, why can’t a machine do that? It’s really a curation job and ultimately that can be done by a computer. Finance is just another set of data.” Gnirck agrees: “In research analytics there’s so much data involved that eventually machine-learning will take some of the human jobs away.”
You may need more than swagger and a passion for financial products to clinch a sales job in the future. “Right now around half of a salesperson’s job might be spent monitoring the markets – that’s not efficient,” says Siantar. “Fintech companies could in theory produce artificial intelligence that could reduce this to 10%. If you kept your sales job it would make you more effective, but it could also lead to fewer jobs in total.”
Nguyen Trieu from Citi believes fintech could shake up other banking jobs in the future. “We will continue to see the trend for more e-trading on trading floors and less need for portfolio managers in vanilla asset management,” he explains. “Even structured products will be moving towards automated trading and marketplaces. For example in structured products, there’ll be more focus on using technology to distribute products and less focus on pricing complex products.”
You’ve survived your back-office job being offshored and you’re still working in a major finance centre. Congratulations. Trouble is, however, still on the horizon. “Settlements and custodianship start-ups are already starting to spring up in places like London and Hong Kong,” says Gnirck. “Look at letters of credit and invoice financing in trade finance – large banks have thousands of people checking transactions, but they could eventually be replaced by blockchain technology, potentially developed by a start-up and sold to a bank.”
While compliance employees can rest easier than most people in banking, they too must keep a watchful eye on technology, or more precisely – ‘regtech’. “Billion dollar fines have pushed banks to increase the number of staff in compliance, but this paradoxically creates a high rational for banks to look at savings where possible,” says Janos Barberis, founder of Hong Kong industry group FinTech HK. “More regtech in the future would allow banks to cut down on some compliance staff, allowing faster identification of non-compliant behaviour and avoiding the lengthy fraud auditing process.”
Automating compliance has its limits both technically (how to capture the “spirit of the law” in a line of code) and from a prudential perspective (what happens to the "compliance culture" when employees rely too much on computers), says Barberis. “But while banks might not cut too many staff very soon, compliance professionals should aware that the industry and regulators are moving towards a more data-driven regulatory regime, which will eventually impact their job.”
The retail and corporate banking sector is already under fintech attack, especially from the myriad of peer-to-peer lenders which are launching on a regular basis. “I think that the peer-to-peer marketplace will continue to grow at a breath-taking pace, both for consumers and institutional investors,” says Nguyen Trieu from Citi. “Improved user interfaces will be a key area, and perhaps one of the most active areas for fintech acquisitions by banks.”
“We’re always watching the fintech companies as they are trying to compete in our space and we can learn from them as they don’t have the traditional bank way of thinking,” says Lim Chu Chong, head of SME banking at Singaporean bank DBS. “In corporate and SME banking, digital services can take over more work from staff. We are expanding our headcount but might have even more staff without new technology, such as the apps that our relationship managers use.”