Just as the development of electronic trading led to mass downsizing on sales desks across Wall Street, advances in artificial intelligence could decimate the ranks of banks’ back-office staff, according to former Citigroup CEO Vikram Pandit. And given the rapid pace of technological advance, jobs in operations and retail banking could begin disappearing in as few as five years.
Pandit, who shared his thoughts about the future of the banking industry during an interview with Bloomberg, said that the industry’s focus on technology as a cost-saving measure - Bank of America Corp.’s Chief Operating Officer Tom Montag said in June that the bank is searching for more ways for technology to replace people – has inspired him to move up his timeline aggressively.
As Bloomberg points out, Pandit’s forecast for job losses is in step with one made by Citigroup last year. In a March 2016 report, the lender estimated a 30% reduction between 2015 and 2025, as banks find more applications for automation in their retail businesses. That could lead to job losses numbering 770,000 in the US, and as much as 1 million in Europe, Citigroup said.
“Everything that happens with artificial intelligence, robotics and natural language - all of that is going to make processes easier,” said Pandit, who was Citigroup’s chief executive officer from 2007 to 2012. “It’s going to change the back office.”
This pressure on employees to prove that they’re more productive than the technology has transformed banking into an “enormously competitive” industry, Pandit said, adding that he expects the shift to produce yet another wave of consolidation in an industry that’s already dangerously concentrated, a flaw that was both exposed and exacerbated by the financial crisis.
Though he also believes advances in technology will lead to the development of “specialist providers,” making the financial system “a bit more decentralized.”
Pandit achieved lasting notoriety after becoming CEO of Citigroup in December 2007 just as the cascading subprime mortgage crisis was driving the US economy into a recession. He had previously led a hedge fund that was acquired by the bank, and, upon taking the top job, was widely criticized in the press for his inexperience in managing many of Citigroup’s core businesses like, for example, banking.
He’s now the CEO of Orogen Group, an investment firm that he co-founded last year, five years after being forced out as Citi’s CEO.
While Pandit’s prediction should be concerning to anyone who works in the financial industry, humanity as a whole would have much more to worry about if another CEO’s dire predictions about AI are eventually realized.
In one of several memorable tweetstorms on the topic, Tesla CEO Elon Musk urged governments to start considering regulation to govern the development and application of AI technology, arguing that the machines pose a greater danger to the US than North Korea.
If you're not concerned about AI safety, you should be. Vastly more risk than North Korea. pic.twitter.com/2z0tiid0lc
— Elon Musk (@elonmusk) August 12, 2017
However, other banking CEOs, including JP Morgan Chase & Co.’s Jamie Dimon, have played down the potential impact of technology in the financial industry, as Bloomberg reminds us. Conversely, automation could create “more opportunities” for employment as the firm hires a bevy of “technology workers.”
“JPMorgan Chase & Co. CEO Jamie Dimon cautioned in June against overreacting to the impact of technology on jobs. While the bank is using technology to reduce costs, that helps create other opportunities, Dimon said in an interview published on LinkedIn. He predicted that employee numbers at his firm will continue to rise -- as it hires more technology workers.”
…Of course, Dimon has every reason to expect this: After all, that’s exactly what happened when the adoption of automation by manufacturers began to accelerate. Right?