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Automation of banking: the opportunities

I’ve recently read that Stephen Hawking has warned that the development of full artificial intelligence could spell the end of the human race. In the banking and finance industry, automation also conjures up Doomsday visions. Yet what I am seeing is that the increasing digitalisation of the industry is also creating many opportunities for forward-looking and highly skilled candidates. There are new roles emerging in automation engineering, banking IT and data analysis.

A shift in the labour market

Technology, automation and robotics will cause a significant shift in labour markets in the next twenty years, according to recent research carried out by Deloitte with Carl Benedikt Frey of the Oxford Martin School, and Michael Osborne of the Department of Engineering Science at the University of Oxford. They estimate that in the UK, 35% of existing roles are at risk of being replaced, while in the United States, 47% of roles are at risk. The research identified “high risk” jobs as those requiring repetitive processing, clerical and support and sales services, while “low or no risk” jobs are roles requiring digital, management and creative skills.
 

Banks investing in digital services are impacting on employment

We are now seeing that the banking and finance industry is mirroring the trend. In October 2014 Lloyds Banking Group, the UK’s largest retail bank, hit the headlines when it announced 9,000 job cuts and unveiled a new digital strategy backed by a significant £1.6bn investment in digital services and automation.
 
Far from being alone, Lloyds is one of many of the world’s largest banks that have announced shifts to digital technologies, as automation is helping solve many of the issues that have plagued the industry since the credit crunch in 2008. On top of dramatically reducing costs, automation can help address regulatory challenges by allowing transactions to be properly tracked and recorded through a digital process. This leaves less room for errors and contributes to delivering a faster, more efficient service.
 

“The banking business model is fundamentally changing. Digitalisation, self-service models (e.g. mobile or internet banking) and new competitors will further accelerate this trend. Cost efficiency is getting more important due to the higher costs of regulation and lower margins in the core business,” notes my colleague Gerald Fahnenbruck, Team Leader Contracting for Hays Finance in Germany".
 

Gerald believes that automation will continue to accelerate up during the next couple of years as the industry is still playing catch up. “Compared to other industries, such as the automotive sector, process efficiency in the finance departments in banks lags far behind. New IT tools and IT solutions will help to automate and rationalise simple tasks.”
 
His view is shared by consulting firm McKinsey, which wrote in a June 2012 report that a significant opportunity exists to increase the levels of automation in banks’ back offices. “IT-enabling operations encompass both automating processes (preventing customers from using paper, digitising work flows, and automating or supporting decision making) and using IT solutions to manage residual operations that must be carried out manually (for example, using software for resource planning). By taking full advantage of this approach, banks can often generate an improvement of more than 50% in productivity and customer service.”
 

New opportunities due to changing financial IT landscape

Job losses are inevitable in certain areas of banking, such as retail banking or those requiring simple tasks in the banks’ back offices. However, this transition will also lead to the creation of new jobs, especially for highly skilled candidates, Gerald argues. “I see opportunities for IT experts, regulatory and risk experts and process/lean experts. In particular, demand for banking IT experts will grow. New IT landscapes and systems will have to be implemented and administrated. Online IT experts will also benefit from this development,” he says.
 
Gerald believes increased automation will bring several benefits to the sector, such as an enhanced customer experience: “IT-enabled automated processes will lead to improved cost ratios and increased productivity. Moreover, customer satisfaction might grow too due to paperless and digital workflows, faster response times and lower error ratios. Cost savings can be invested in new online business models, such as cashless and mobile payments, realtime services and social media based services, alongside new products in order to be competitive.”
 
As McKinsey points out: “Banks cannot afford to miss the opportunity to automate now.” Candidates with the right set of skills cannot afford to miss this opportunity either.
 
Author: Geoff Fawcett.
Geoff Fawcett has been in the recruitment industry for over 16 years. He is currently responsible for Hays Financial Markets, which provides an integrated recruitment solution to London based Banking & Financial Services organisations. Specialist divisions include Finance, Operations, HR, Marketing, Purchasing, Secretarial, Risk & Compliance, Front Office, Finance Technology and Executive with in excess of 100 consultants.

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