Impact of Automation in Banking Industry


Technology, by its basic underlying concept was supposed to make things easier in a more pre-defined manner such that processes can be done in a sequence and the desired results can be obtained. But if one stop seeing the effects of it on the macro level and goes into the details, it is quite evident that use of technology in work place has had both the good as well as the bad effects. Banking Industry, being one of the most regulated industries on the globe has seen many changes in the way of working in the past few decades. From being solely driven by work force, now more and more technology involvement has led to automation of services. But only the technology or automation inside the sector cannot be blamed. Because of development of many ancillaries as well which gave better internet penetration (costs slashed to almost nil as compared to the starting), it has further motivated the customers to go towards more technology-savvy methods.

Banking industry has evolved a lot. Gone are the times when one has to go to bank physical branch to make deposits, now we have cash deposit machines to do so. Economies all across the globe are going more and more cashless and the trend of online shopping has increased at an unbelievable pace! In a recent data released, around 45% of people worry about the risk of unemployment and this is basically caused by the effect of automation. Long gone are times when humans could have applied for a job, researchers say that one time will come when job openings will have the line “Humans need not apply”.

But why this happening is a real question. On one hand where we say that human intervention is essential for certain roles like a relationship manager in a bank, but isn’t it a top management position? Why are we even looking at those? If one has to see, then the primary focus must be on the lower end jobs. We can divide this into the variable hour’s employment and the fixed employment.  What has been hit the worst is the lower jobs where the employer could identify clearly the money spent on human capital, skilled in nature. This phenomenon is called as  de-skilling. With the intervention of machines and technology, one needs only the lower skilled people to do machine operating work. This saves cost for the institution and leads also to more efficient results. Now in this case, the people who were previously engaged in the same job gets shifted a notch up and become semi-skilled. Now the same job as in question also requires lesser number of people thus leading to loss of jobs.

The effect of technology is higher even for the people in top management. They have to be aware of all the new methods because the clients want more cost savings and want to in pace with the world. Now for a person involved in a top management, they have resources and knowledge to learn more. Hence the semi-skilled person is the one who is at a real loss.

  • The increase in technology is directly proportional to the need for skilled labour.
  • The increase in technology requires increase in skills of middle level jobs as well.
  • Low skilled jobs are created but are mainly for an outsourcing purpose and provide for cheap labour.

Technology Changing The Face Of Bank Offerings

Technology has completely transformed how the banks used to work. Now they are moving at a very fact pace towards digitalization of banking services. Most of the services that are provided by the banks can now be accessed through online medium. Even if we divide the services into regional banks serving mainly the retail customers and whole sale banks catering to corporate needs, technology has found a way in it.

Regional Banks:

If we are to consider the current state of employment in bank branches, reports tell that nearly only one-third of the previous work force is employed now. The banking sector approach to business has also transformed from what it was initially. The focus was previously laid on fulfilling requirements but now it is more on customer service and improving the status of the same. More focus is now laid upon profitability fo the bank as well as that of a customer which helps in nurturing the relationship. Clearly for purposes like these including cross selling and up selling, a high school graduate is not enough and one needs to have people with better skill sets.

Moreover, with digitalization, services are becoming more complex for the operators and hence the educational qualifications are increasing tremendously. To beat the immense competition, banks need to stay connected to their customers to insure stickiness and that requires constant communication which way easier by the way of automated messages, email etc… There is no doubt that human touch is required in the form of relationship managers but there is only a little they can do.

Wholesale Banks:          

Wholesale banks largely serve to the business houses and corporate clients and thus have a completely different set of services as compared to the regional banks. The needs of this customer segment differ majorly both in terms of the type of products and their monetary value.

The effect of technology has not only been on the banks but also the businesses that they serve to. The business in 1980’s were going over other countries and increase of globalization further helped to speed up the process. Thus there were risks like foreign currency investments, trade risks etc… These services were possible to be provided on through technology. The wide range of services to be provided thus required technical skills and requirement of MBSs increased drastically. Services like risk reduction and analytics, loan analysis, credit management also caught up soon.

Those banks who could not support these functions internally then went on to a cheaper source “outsourcing of activities”. Thus development of IT sector got a new pace.



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