One of the key debates over economic changes and the related impact of digitalisation centers on the substitution of “old” jobs by “new” jobs and to what extent this may cause social disruption.
The banking industry has traditionally seen technology changes as an opportunity rather than a threat. Current disruptive challenges are no exception. However, a first necessary condition to understand digital disruption in banking is that it does not operate in a vacuum – it coincides with other extraordinary factors and exogenous challenges, including extraordinary monetary conditions, new sources of competition that affect all distribution channels, increased regulatory scrutiny that has put substantial pressure on the industry and long-term demographic changes, such as an ageing population. The future of banking jobs is closely related to all of these transformations, but each of these factors bring with them their own unique effects. One of the most daunting analytical challenges is identifying which ones will dominate and what the long-term net effects will be.
The Future of Banking Jobs analyzes a wide range of perspectives on the likely evolution of banking sector employment. While it assumes that every industrial revolution comes at a cost and introduces a number of uncertainties, it also points out a larger number of advantages and opportunities. The advent of the COVID-19 pandemic has somehow overlapped with changes that the sector was undergoing in the aftermath of the financial crisis, some of which had already been present for decades. Firstly, consolidation has been intermittent, but persistent. The number of financial institutions has markedly declined over the last 40 years, while the average size has substantially increased. However, particularly in retail services, we are observing how bank branches have modified their structure and services year after year. Information and delivery channels are now more varied than ever before. Additionally, we have also witnessed a relative democratization of services that were once exclusive to a limited number of clients and distributed by very specific personnel, including investment and other private banking services. After the financial crisis, some of these transformations had accelerated, in part due to the need for restructuring balance sheets and improving efficiency. Nevertheless, the COVID-19 pandemic has accelerated these changes even further. Banking jobs are evolving in a similar manner to those related to some hospitality services, or to the automobile industry. Demand is increasingly technology-driven and supply should be as well.
Despite the dramatic interpretation of industrial disruptions that we have witnessed during other historical episodes, banks are finding ways of retraining existing employees and onboarding new employees with new and highly demanded skill sets. Those employees leaving banks are also finding new opportunities due to increasing competition from other players. There is a new competitive structure where platforms, remote working and flexibility are key drivers. COVID-19 has provided a natural experiment to explore some of these changes, as well as having served to accelerate others. The labor environment in banking will continue to change and emerging challengers from the fintech and BigTech world will provide new competition, but also some fresh ideas on how learning capacities and skills may be developed for the benefit of banks, their workers and the services they offer to society.