According to a Wells Fargo research report, robots will eliminate 200,000 jobs in the banking industry within the next 10 years.
These numbers seem astounding and mind-boggling. However, the robot overhaul has been in motion for some time. While others use the term “robots,” it’s fair to say that this also refers to artificial intelligence, advanced technology and sophisticated software.
Like many business sectors, banks are under siege from a confluence of factors working against them. The current trend of low and negative interest rates is an anathema to their business model. When rates are too low, the banks’ margins are squeezed so tight that it’s hard for them to turn a profit. Lending is the cash-cow division for most banks. When this area is under pressure, it doesn’t bode well for the bottom line.
Banks are worried about a myriad of other factors, including how the decade-long stock market surge will end—in a mild recession or something far worse. Fears of a possible recession may curtail future business. Trade and tariff wars, nasty politics, Brexit, climate control, FinTech disruptors, low trading volumes, a recent poor slate of controversial IPOs and geopolitical uncertainty and tensions all take their toll.
Unlike other industries, banks are not weighed down with expensive factories, manufacturing plants or showrooms full of high-priced vehicles. Their biggest expenses are their employees. If banks can replace people with robots and technology, while continuing to do business, profits will soar. To reduce headcount, they have adopted robots, artificial intelligence and technology.
We have already seen the consequences in our own neighborhoods. It went from a bank on every corner filled with tellers and staff to the closures of the very same locations. As customers became more comfortable with online banking, the need for costly real estate and teams of people in branches diminished.
According to the management consulting firm, Boston Consulting Group’s latest report, advances in robotics and technology allow businesses to perform more complex functions at greater efficiency and ease. Automated workforces have huge benefits for banks. While an employee needs lunch breaks, vacation and sick time, bathroom breaks, insurance and health benefits, robots do not. Technology works all of the time without needing coffee breaks, raises, promotions or a pat on the back. The costs for robotic hardware and software have dramatically decreased by around 40% over the last decade. It is now much cheaper for banks to install and deploy. Technology requires an initial expense to install, some upgrades,…